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Transcript - Hull, QC - 2000/08/17

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Providing Content in Canada's Official Languages

Please note that the Official Languages Act requires that government publications be available in both official languages.

In order to meet some of the requirements under this Act, the Commission's transcripts will therefore be bilingual as to their covers, the listing of CRTC members and staff attending the hearings, and the table of contents.

However, the aforementioned publication is the recorded verbatim transcript and, as such, is transcribed in either of the official languages, depending on the language spoken by the participant at the hearing.

11220 To my left are André Provencher, Senior Vice-President at TVA, and Jacques Dorion, the President of Carat Canada.

11221 At the table immediately behind us are Richard Peirce, a consultant for Men TV; Clara Northcott, the President of Northcott and a consultant for INFASHION; Elaine Waisglass, the President of Wychwood Park Production and a partner in Digipix; Don McFatridge, the President of Strategy First, a consultant for Game one, and Gilles Lioret, the President and CEO of Game One in France.

11222 At the table to my right are our consultants, Alain Giguère, the President of CROP; Ody Giroux, Director, Creativity and Programming, Carat Stratégem; Gilbert Paquette, Vice-President and Managing Director of Carat; Elizabeth Deschamps, Director, Special Programs and Development, Speciality Services at TVA and Nicolas Bélanger, President of DTI Infogrammes and Stéphane Ethier for Game One. Seated in the audience is Glenn O'Farrell from CanWest Global.

11223 TVA is a relatively new player in English-language broadcasting and before introducing our applications, I would like to take a few minutes to present the company to you.

11224 TVA is an integrated communications company with operations in television, broadcasting, production, the Internet, publishing and other sectors related to television content.

11225 TVA is the largest private sector broadcaster of French-language entertainment, news and public affairs programming in Canada and is widely recognized for the highest standard of its popular Canadian content.

11226 In broadcasting, TVA owns and operates six of the ten stations that make up the TVA Network in Quebec, including CFTM-TV Montréal, the network's flagship station, as well as five regional television stations. TVA also owns and operates LCN, an all-news specialty service that provides 15-minute information segments consistent primarily of news, sports and weather.

11227 As well, TVA holds a minority shareholder in English-Canada station affiliated with the Global Television Network, CKMI.

11228 TVA also has a 70 per cent equity interest in TVA International based in Montreal with offices in Toronto and in Los Angeles. TVA International is the leader among Canadian distributors of television programming and the second largest producer in Canada. TVA International produces and co-produces a range of English-language television programs for the American market as well as the Canadian and European markets.

11229 An excellent example is the current shooting of Largo Winch, a co-production in partnership with M6 in France, Betalfilm and Tandem Communications in Germany, A.T. Production with RTL in Belgium, and Paramount International in the U.S.

11230 TVA International also produced several series and made-for-TV movies such as the Lucille Teasdale Story that was aired on CTV and will be broadcast throughout the world and A Terrified Woman with Nastassja Kinski. TVA International has also produced Xcalibur, Fly Tales in 2D and 3D animation, and quality series for young people such as Popular Mechanics for Kids, To the Max and The Magical Kitchen.

11231 With regard to the Internet, TVA is the controlling shareholder of NETgraphe. NETgraphe is active in the Internet publishing sector as well as site design, production and maintenance. Among its products are the leading portal site La Toile du Québec and worldwide Web sites such as Jobboom and Webfin. Le Groupe Vidéotron, the controlling shareholder of TVA, is also a partner in NETgraphe. As you will remember, in the early 1990s, Vidéotron and TVA introduced a broad range of technical innovations related to television content and interactivity.

11232 TVA's success story in the French-language market is based on our savoir-faire, passion and commitment to high quality Canadian content. Eighty-five percent of TVA's programming budget is spent on Canadian programs. By emphasizing Canadian content, the TVA Network's total market share amounts to 38 per cent of the French-language market, more than the total of TVA's three conventional French-language network competitors combined.

11233 This allows us to contribute significantly to Quebec's successful star system.

11234 We at TVA are convinced that sustained investment in Canadian content can nurture a Canadian star system in English Canada and generate more viewer loyalty as it has in French-language television and in Canadian music.

11235 TVA would like to extent its programming expertise and experience to English-speaking television viewers in Canada and apply our unique approach for new English-language digital services. This approach includes detailed market research, extensive concept testing and development, strategic positioning, the construction of durable partnership and solid business planning.

11236 Diversity in ownership generates diversity in choices and voices. TVA already has sales and production offices in Toronto. Now, we would like to initiate a new centre of television content development in Toronto to share our special knowledge and abilities with the English-language production community.

11237 Before we go to the four applications, I would like to show you some testimonial we have had in English-Canada.

--- Video presentation / Présentation vidéo

11238 MR. LAMARRE: I would now ask Richard Peirce to talk to us about Men TV.

11239 MR. PEIRCE: Good morning, Madam Chair, Commission members.

11240 Men TV is a completely new concept for television. Men TV will be a lifestyle programming resource that targets men aged 25 to 49 who are urban, professional, health conscious and socially active. Men TV will provide varied programming related to the gourmet market, the luxury market, men's beauty and fitness, the book and music market, adventures and leisure sports from a Canadian men's perspective.

11241 There is no service comparable to Men TV in Canada or the United States. Of course, there are television programs presented by the conventional and specialty services that contain fitness, health, recreation, travel, fashion and cooking programs that appeal to some men. But many such programs are addressed to women and almost none specifically target men or men's lifestyles. Men TV wants to correct this situation.

11242 Working with TVA's partner, the Global Television Network, Men TV will present a 24-hour a day service offering programming related to four themes: Lifestyle, Free Ride, Passion and personality.

11243 The lifestyle theme covers programs such as Get Gold, Gourmet, and BookClub. Free Ride includes programs such as Sail Away, world class Dive, the climb and Extreme Ski. The Passion theme covers programs such as Casino Life and Music for Men. The Personality segment will include programs such as Fabulous Fortunes and Bodyshaping. Men TV will be resolutely oriented toward Canadian men's lifestyle, leisure and fashion issues presented in the television magazine and documentary style format.

11244 The programming on Men TV will provide a minimum of 50 per cent Canadian content in Year 1 and this will continue throughout the licence period to attain planned expenditures on Canadian programs of $27 million over the seven-year period. This amounts to 74.4 per cent of Men TV's total programming expenses. The vast majority of this spending will consist of original programs and acquisitions from the Canadian independent production sector.

11245 As the Carat market study filed with the Men TV application demonstrates, the recent history of the subscription magazine industry provides valuable insight into male consumer behaviour today. While the circulation of general interest magazines is declining throughout North America, the circulation of innovative, specialized magazines whose sales price ranges between $7 and $22 is increasing significantly. Examples of men,s lifestyle magazines include: Robb Report, Cigar Aficionado, Esquire, Men's Health, Men's Journal, Outside and Dirt Wheels. Men TV's market study appropriately draws a parallel between the growth of specialized lifestyle-oriented magazines and the expansion of Canadian specialty television services.

11246 What is more, the CROP opinion survey submitted with our application confirms male consumer interest in the type of service proposed by Men TV. Forty-three per cent of English-speaking respondents indicated that a service like Men TV would be of interest to members of their household.

11247 Men TV also plans to make innovative use of the Internet as a companion to its digital television programming service. The Men TV web site will include distinct sections entitled Live, Spend, Think, Talk and watch that are detailed in our application. The Men TV web site will provide a virtual men's club where men can discover and discuss new trends, shop and interact with Men TV itself as well as other viewers.

11248 Based on TVA and Global's analysis of the current media landscape, we believe there is a real and viable market niche for Men TV. Our experience with specialty services and magazine-style formats ensures that Men TV will be a powerful and attractive addition to new Canadian digital television packages.

11249 Thank you. Now, Clara Northcott will continue with INFASHION.

11250 MS NORTHCOTT: Thank you, Richard, and good morning.

11251 TVA's INFASHION reflects how important fashion and lifestyle have become in Canadians' daily lives. INFASHION satisfies the public's growing desire for fashion related content while showcasing and promoting the Canadian fashion industry at home and abroad. Not only has fashion become big business, but many Canadian designers have become household names and some are international stars. Think of Dorothy Grant, Simon Chang, Franco Mirabelli, Brian Bailey, Lida Baday and Hilary Radley.

11252 Despite its growth in interest, very little content related to fashion, beauty and design is available to Canadians through a medium other than magazines. Examples of Canadian women's magazines that address lifestyle issues include Flare, the new Chatelaine and Style and Home.

11253 The growth in Canadian sales of lifestyle magazines reflects the lifestyle information Canadian women are seeking and indicates how a digital specialty television service dedicated to fashion and lifestyle issues should position itself. TVA's INFASHION will convert this lifestyle content from the static medium of print to the dynamic, moving images provided by television.

11254 As the Carat market study submitted with the INFASHION application demonstrates, this interest is confirmed by the economic growth of the Canadian fashion, clothing, cosmetics and beauty care industries over the last few years. For example, Canadian sales of personal care and beauty products alone increased by 14 per cent between 1996 and 1998 to reach more than $900 million.

11255 Industrial sectors related to fashion and beauty are also experiencing rates of economic growth significantly greater than the economy as a whole resulting from the demand for fashion and beauty products.

11256 Another indicator of the demand for a new digital service such as INFASHION lies in the results of the opinion survey conducted for us by CROP. one half of English-speaking Canadians believe the women's lifestyle channel such as INFASHION would be of interest to members of their household, with a particular interest among 18-to-44 year olds.

11257 INFASHION will inform and entertain digital television viewers, women in particular, about fashion, beauty and design from a uniquely Canadian viewpoint. The programming on INFASHION will provide a minimum of 50 per cent Canadian content in year one and throughout the licence period to attain planned Canadian program expenditures of $33.5 million over seven years.

11258 Spending on Canadian programs represents 85 per cent of total spending on programs to be telecast over the seven-year period. The vast majority of this spending will consist of acquisitions from the Canadian independent production sector.

11259 INFASHION will present programs about fashion, beauty and design from an overall lifestyle perspective rather than from a formal, academic or artworld-oriented design perspective or a how-to perspective. As you can see from our sample program schedule, Fashion and Beauty themes will account for over 60 per cent of INFASHION's programming, while Lifestyle themes will account for 26 per cent and Home Design for 13 per cent. Each service would complement the other and generate program synergies to the benefit of subscribers.

11260 In the United States, the recently launched STYLE channel has been highly successful and expects to have 20 million subscribers by December 2000. Toronto and Montreal are important centres of North American fashion and design. INFASHION offers a new digital television service developed by and for Canadians, based on an economic and programming model that has been tried and tested in the U.S. market.

11261 Now, Elaine Waisglass will continue with Digipix.

11262 MS WAISGLASS: Good morning. I'm Elaine Waisglass.

11263 Digipix proposes a new digital specialty service based on a unique programming concept: drama and documentaries and digital video format and as a medium for artistic creativity and expression of personal vision. Digipix celebrates this revolutionary technology that gives producers complete control over every single aspect of the video image including colour, texture, shape and transparency. This is not possible with film or analog video. Until recently, only painters had access to such a range of dynamic imagery. The arrival of digital video recalls the introduction of acrylic paints that soon led to an entirely new aesthetic developed by artists like Frank Stella and Andy Warhol.

11264 Digipix proposes to acquire and commission programming that explores the visually creative aspect of digital video to encourage video producers to think outside the box, to encourage unheard voices, to discover innovative ways to use the new artistic tools offered by digital video, and to rethink the traditional forms of drama and documentary.

11265 Digital video's lower production costs enable the auteur approach to drama and documentaries that is not possible for high budget theatrical feature films with many financial partners. Digipix will showcase individual video artists and the smaller independent production companies.

11266 We believe there is now a volume of programming sufficient to program a new service such as Digipix. Of course, there would be some recognizable titles such as The Blair Witch Project, The Buena Vista Social Club, Time Code and The Celebration which won the Prix du public at the Cannes Film Festival in 1998. But the great majority of Digipix's programming would come from lesser known productions and newly commissioned work.

11267 Currently, no television channel anywhere in the world devotes an entire program schedule to stylistically, leading-edge, creative digital video appealing to young and young-at-heart audiences. Digipix would be the first.

11268 Recent new technology in consumer-level broadcast quality cameras and consumer-level of desktop computer editing equipment have led many Canadian schools, elementary and high schools, to recognize the importance of media literacy and to offer courses in video production. At the college level, new digital production courses are coming on board in almost every province. In its program schedule, Digipix includes the opportunity for non-professionals and students to interact with Digipix by entering digital video festivals and contests.

11269 Interactive programming is a unique feature of Digipix. Program interactivity is central to Digipix supporting web sites that will offer: a virtual school that teaches how to make video programs; technical support and information on video production; a boutique for consumer-level video equipment and supplies; the opportunity to comment on and review web-streamed videos; and a means of contributing potential video programs to Digipix.

11270 Digipix will make a significant contribution to Canadian programming by: providing a minimum of 50 per cent Canadian content in year one and throughout the licence period; spending an estimated $32.4 million over the initial seven-year licence term on Canadian programs for telecast; and contributing an estimated $24.2 million over the initial licence term for the commissioning and acquisition of programs from the Canadian independent production sector.

11271 How attractive is Digipix? According to the CROP opinion survey conducted for the applicants, 68 per cent of English-speaking respondents expressed an interest for themselves and their households in a service such as Digipix.

11272 Digipix represents a tremendous opportunity to launch a new digital service different from all of the other Category 1 applications before you. Digipix would make an excellent complement to any other applications the Commission may want to approve.

11273 And now, Don McFatridge will continue the presentation with Game One.

11274 MR. McFATRIDGE: Thank you, Elaine. Good morning.

11275 Game One is a perfect example of the potentially innovative use of new digital media in the age of convergence -- the marriage of a new digital specialty television service with a powerful new element in the computer-based home entertainment business -- digital video games. Together with TVA's partner, I-Line, Game One proposes to launch a new Category 1 digital service dedicated entirely to the world of video games, 24 hours a day, seven days a week. Our objective is to hook up with Canadian game players in such a powerful way as to enhance their loyalty to television.

11276 TVA and I-Line's application for Game One is the English-language counterpart of la chaîne Game One, our application for a distinct French-language Category 1 digital service devoted to video games.

11277 The synergies between the two new Canadian services would be enormous. Game One itself is a trademark owned by I-Line which operates video game specialty services in Europe.

11278 Game One will schedule all video game programming, all the time, and nothing but video games. Game One's approach is derived from several fundamental facts.

11279 The video game business is booming worldwide, so much so that this year, in North America, video game revenues are expected to exceed theatrical box office revenues.

11280 In Canada, one household in three, about six million families, own a video game system and these systems are heavily used. 2.3 million Canadians play a video game at least twice a week.

11281 As a result, Canada is in the forefront of video games technology and development thanks in part to the Canadian operations of prestigious companies such as Electronic Arts and Ubi Soft as well as specialized schools, such as Digipen in British Columbia and the NAD Centre in Montreal.

11282 Game One programming will provide a minimum of 50 per cent Canadian content, both over the broadcast day and in the evening hours, beginning in Year 1 and throughout the licence term. As a result of our reciprocal programming agreement, 98 per cent of Game One's expenses related to programs telecast will be devoted to Canadian programming.

11283 Game One is targeted at a niche market of young Canadians aged 12 to 34 years, primarily males, who are the major consumers of video games. This includes a significant number of adults who find themselves attracted to the video game phenomenon. Game One program hosts will be the image of their target audience: Young, crazy about video gaming, and hungry for new adventures beyond the scope of conventional television programming.

11284 Game One will use the digital medium in a highly interactive way that is in keeping with its audience. Game One will provide a bridge for the development of interactive television and ensure that all of its television programs are adapted for Internet broadcast. But more than this, on its web site, Game One will make available research results underlying the creation of its content and stimulate the creation of virtual communities dedicated to video gaming.

11285 Game One's web site will be divided into four theme parks: Network Gaming, The Gaming Graveyard, Gamers' Secrets and On air. Network Gaming will permit gaming with other players on-line and The Gaming Graveyard will provide a magazine dedicated to the latest in computer know-how, game consols and gaming software. Gamers' Secrets will contain an electronic billboard and chat zone while On Air will serve as a companion to the digital television service with program schedules and synopses presented in a high quality format.

11286 The CROP opinion survey undertaken for the applicants confirms potential consumer demand for Game One. Overall, 40 per cent of English-speaking survey respondents indicated an interest for themselves and their households in a new video game channel such as Game One.

11287 Game One represents a new generation of television services resulting from the convergence of digital television and the Internet. The fusion of these two technologies will permit the new interactive services of the future based on the transfer of concepts from television to the Internet and vice-versa. This is what Game One is all about.

11288 Daniel Lamarre will now complete the presentation.

11289 M. LAMARRE: Madame la Présidente, Madam Chair, Commissioners, this concludes the presentation of each of our four English language applications, but I would like to leave you with some final thoughts.

11290 TVA and its partners have carefully designed these four services -- Men TV, INFASHION, Digipix and Game One -- to contribute to the Commission's objectives for the Canadian broadcasting system. Researching and designing these services has obliged us to think carefully about the criteria the Commission should consider in making its selection of new English language digital television services. Here are our suggested criteria in descending order of importance.

11291 The attractiveness of the service to potential digital viewers, including the value-price relationship and the ability to help drive digital set-top box penetration in the early years.

11292 The contributions of the service to Canadian programming, including a minimum commitment of no less than 50 per cent Canadian content exhibition at the beginning of the licence term, and sustained high levels of expenditure on original Canadian programs.

11293 The contribution of the service to the diversity of available analog programming formats and to the variety of new digital services the CRTC will licence.

11294 The contribution of the applicants to the marketing of the new service, together with the digital distribution undertakings to extend the branding of recognizable concepts.

11295 And the degree of innovation in the digital medium, including the extent of interactivity and the degree of integration of new technologies with Canadian programming.

11296 Success in attaining objectives similar to these, within the confines of a robust business plan, lies at the heart of TVA's growth and diversification over the last few years. Now we would like to extend this success to our proposed English language digital services.

11297 Mesdames et messieurs, we would be delighted to answer your questions.

11298 LA PRESIDENTE: Merci, Monsieur Lamarre.

11299 We will proceed as we have before, which I'm sure some of you are familiar with, by addressing general questions. I will attempt, to the extent possible, even though we want to try to not spend too much time repeating things, to deal with matters at the general level, but obviously, for procedural reasons, where we press you to accept conditions of licence, that will be during this specific application.

11300 I certainly hope I won't mix all these applications. You will understand that it's difficult to keep 88 of them apart, let alone yours, and in which language. So if I make a mistake, please don't hesitate to correct me if I mix up one application with the other. Hopefully, I won't, with all this paper, upset my glass of water and have you read it as a cold shower on one of your applications.

--- Laughter / Rires

11301 THE CHAIRPERSON: You have already given us the order of importance or significance of the criteria the Commission should use in licensing. So I will limit my question to asking you whether these criteria should always be weighed in the same manner or whether there would be any reason to displace them in the order of significance.

11302 One of the interesting thing about your four applications is they have a lot in common. You break even in Year 5, except in Digipix in Year 4, the Canadian content level is identical in all of them, the price is also identical but for maybe five cents in one case. There seems to be an approach that deals with them but for the programming in the same manner.

11303 So I would like your comments, when we use these criteria, to whether there is any room or any wisdom in shifting them and depending on what criteria.

11304 MR. LAMARRE: I guess our approach certainly reflects some beliefs we have. What we have enjoyed in listening to others in the last few days, it's the open forum we're having here to exchange about the future of digital television, because we all seem to be looking with a crystal ball.

11305 But there are things that we strongly believe. The first one is the importance of content. You know, we're looking to the television environment right now, and no one can pretend that there is not an important offer of services to Canadians right now. There is. So in the digital world, we strongly believe that it will be very important that we distinguish ourselves from what there is out there.

11306 The one thing which distinguishes our proposal to others is that we think that we're not going to have a second chance to do a first good impression. The launch of those services is crucial because there is some scepticism out there from the consumers and they want to make sure when you talk to them -- and we spend a fair amount of time researching them, talking to them, trying to understand what their needs were, and if I would try to summarize in one sentence what they want, it's that they want products and they have their own needs.

11307 So that's why you can see, in all of our services, a similar approach. It's not, Madam Chair, that we're lazy. It's because we believe that the same philosophical editorial approach should remain, meaning really go, present to them great quality program, bring also innovative ways of attracting the consumers. That's why we're coming to you with niche format and we're very precise about what we want to offer to the consumers, and at the same time, we want to make sure that the Canadian content that we're offering is interesting to them.

11308 I have to admit that I have been pleased and impressed to see, in the last few days, how our friends in English Canada discover the importance of Canadian content and we applaud that. We think, as they do, that we have no choice in the future than to present Canadian content, because there are more and more American services, there are more and more offers for the consumers, and the way that we are all going to distinguish ourselves is with strong Canadian content, where the consumers can see relevancy and we have to be relevant to the consumers with our new services.

11309 I guess if I try to summarize my thoughts on this matter, Madam Chair, it's to insist not on the attractiveness. Attractiveness to us is summarized in two words: a) content, and b) marketing. We will have, as an industry, to spend a fair amount of time marketing our new services in the new digital world we're describing.

11310 THE CHAIRPERSON: Mr. Lamarre, you are about to find out how difficult it is to get Canadians to watch Canadian content. I agree with you, it will have to be attractive and appealing. And, of course, attractive would bring with it the whole question of diversity and whether or not the service brings to the table what is already available to the viewer.

11311 On that question of diversity which immediately brings up the question of competitiveness, how should the Commission approach that whole area, which we will discuss more when we look at your specific applications? Should the Commission look at it from the perspective of the viewer? Should it look at it from the perspective of ensuring that the business plan of the licensee is more likely to be achieved if it chooses certain proposals rather than others?

11312 So I would like your comments on how we should address the question of competitiveness on two levels, one with existing services, that was one of the criteria, and the licensing framework for Category 1, and two, from the perspective of your competitor, so to speak, in the 88 applications?

11313 MR. LAMARRE: I would like to start, if I may, with a general comment and then be more specific about your question.

11314 My general comment is we think that diversity goes by diversity of ownership. We think that having Atlantis Alliance and CHUM in French Canada has brought diversity and we think that in French Canada their contribution has been very interesting and we agree to that and by the same token we would like to have the same opportunity and we think we can contribute in English Canada.

11315 THE CHAIRPERSON: Mr. Lamarre you better be careful. That means you don't want four -- TVA doesn't want four of the licences in French Canada.

--- Laughter / Rires

11316 MR. LAMARRE: What we mean, Madam Chair -- and I am glad you are opening me this door -- is we think it's important that over and above corporations such as TVA, or any other for that matter, individuals count and what you have before you today is not only the TVA group, but its new partner. We are going to bring in English and in French Canada new entrance and we think it's important and we think it does contribute to diversity because it's interesting to note that sometime we look to the industry, we look to corporations and we think that only corporations matter, but we all know that in content the passion of people does count and that is what we have enjoyed in the last few months preparing for those hearings, bringing to the table with us people who are passionate about the content and we think that the arrival of new entrance in the market is going to be very stimulating and will bring contribution to the system. So that is for my general comments.

11317 To be more specific, we always said at TVA that we don't mind competition. So from an industrial point of view, we think that competition normally like to improve the content of the business. And if I add from the viewers' perspective, viewers want to have a content which is relevant to them and when you look to the offer there is in the market right now, we think it's very important in the digital world that we take a distance from what is already out there and it's not a matter of rules, it's a matter of marketing.

11318 I think the consumer is waiting for new ways to be attracted from the industry leaders and that is what we are proposing. So I might ask André Provencher, who is well known as the responsible of the success of the programming at TVA, to bring a perspective from a programmer.

11319 André.

11320 MR. PROVENCHER: Yes. Thank you, Daniel.

11321 I think it's very important to think of this new market as a different one and not only as the extension of the analog market or only as a new way of distributing programs and bringing programs to the viewers.

11322 When we thought about all the proposals that we were to make, we decided to put the emphasis on ideas and concepts that will bring and integrate added value to the programs that we were to propose and this added value is coming with all the technological possibilities of digital distribution and digital platform. We put a lot of efforts in thinking of interactivity integration to the programs. We really think that it will pay respect to the viewers in proposing this kind of approach on digital and that is the way that TVA always in the past has been related to the viewers and always put a lot of efforts on market research and talking to the viewers and bringing them offers that will be in direct line with what they were asking for.

11323 THE CHAIRPERSON: Of course, for the viewer, and perhaps sometimes for the Commission and the industry as well as between each player, we tend to look at: There is just so many viewers, so much money, so many channels, so much bandwidth. So I guess that is partly what underlies the framework which said that genre should not be duplicated with those that are already in existence, nor with each other as among whoever gets licensed in Category 1.

11324 Do you think we should be more restrictive, more severe, in applying this criterion when we look at licensing the proposals as opposed to whether the proposals are competitive with existing services? Without going into interventions, we know that there intervenors and existing services have intervened to make the point that some of the proposals are competitive with theirs.

11325 So in a general way do you think our test in applying the criterion of direct competition with services should be different as to whether a proposal is competitive with an existing service or should be licensed because it's competitive with another one of the 88, or in your case I suppose we could subtract the francophones.

11326 MR. LAMARRE: I would like to give you some general comments and I will ask André to complement the information. Maybe if I tell you the approach we have developed it will help you to understand maybe better where we are coming from.

11327 We truly believe that there are a lot of similarities in the digital world between the magazine business and the television business for the first time within the digital world because of the capabilities there will be technically. I think we are getting much closer than the magazine business, and in the magazine business what works are products which are very well defined, are niche products, and if you look to all the stats you will see that the niche products are growing and the products who are trying to embrace too many topics don't work out.

11328 So that is the analysis we had made, that is what our research had confirmed to us, and that is the approach we are taking. It does bring some new ideas on the table, it brings new ways of doing things and, as André said earlier, we try to distance ourselves from the actual industry because when you look to the situation we are in today and you analyze the situation from where you are today, we don't think those criteria should remain in place because, as André said, we are moving to a new era.

11329 We are of the belief that the business and competitive rules should remain meaning that we think that the council should remain quite flexible and the rules of the market should apply as much as possible.

11330 Having said that, we are very, very convinced that the people who are going to be successful in the digital world are the people who would have defined precisely the people they are targeting and which will come with an offer which is very different. That is our editorial and program philosophy.

11338 THE CHAIRPERSON: Having said that, these services they were all licensed -- some of them were licensed -- will be competing in a vast array of offerings in the English language in English Canada, both foreign and Canadian, and when you mention, Mr. Lamarre, the market forces, that is not exactly what the protection envisaged for Category 1 is about in the framework.

11339 My question was: Given that that framework where there would be one in each genre, how we should go about this? You have probably followed the hearing and you know that people have a take-home exam and so hopefully you will come back as an applicant for English-language services with an answer to that question of when the dollar hits the corporate pockets, your accountant may have something to say about which of your Category 1 proposals you would not implement together with any other Category 1 proposal that we might licence because you would feel then the reasonableness of the business plan would be affected because of the similarity of the genre proposed.

11340 Now, of course, various parties will have various views about how we should look at that, but that will tend to focus people on whether there is a difference between crime and murder, as I said yesterday, or between lifestyle and design, et cetera, so that there are no surprises for us or for you at the end of the day when a small number of Category 1 services relatively speaking are licensed.

11341 So we will hear more from you on that subject which will give us some insight as to how the Commission should approach this business of competitiveness.

11342 I don't know if you have anything to add about how it should be viewed with regard to existing services and proposals.

11343 MR. LAMARRE: I would just like to add and then I will ask Francine to complement the information.

11344 I would just like to add that we were conscious of what you just mentioned when we had prepared our services. So that is why we try to distance ourselves from existing services. We have been attentive to what you said and what others have said in the course of these hearings and, obviously, we would come back to you with more precision.

11345 But maybe in the meantime, Francine wants to add to that.

11346 Me CÔTÉ: Merci, Daniel.

11347 I would like to say at the beginning that we would, at TVA, rely on the wisdom of the Commission that has applied a case-by-case policy or test and also that we are relying as well on the licensing criteria on the various public notices that the Commission has issued for this proceeding.

11348 That being said, I think that the test that you are talking about should be quite restrictive in the digital universe. That is that a proposed service shouldn't really overlap or attack the core mandate of a competitive service, or a substantial programming overlap we are talking about, of a similar genre or target group.

11349 I think that all these criteria should be looked at in a cumulative way. There should be, I would say, an assessment of the genre, the target group, the approach of programming to see if a service is in competition with another proposed service.

11350 That being said, in the various applications we have, we will have the intervention to make our comments, but it is clear, I think, on the public record already that the two other services proposed by CORUS and CTV for Men TV are competing applications with our Men TV application.

11351 Also, that the service proposed by CHUM for fashion is a competing application with our Category 1 INFASHION. We don't think that Global's application with designation is in competition with INFASHION.

11352 I don't think --

11353 THE CHAIRPERSON: You're early with your take-home exam --

11354 MS CÔTÉ: Well, I prefer to make them now. I'm very lazy.

11355 THE CHAIRPERSON: You always get bonus marks for being early in responding.

--- Laughter / Rires

11356 MS CÔTÉ: But my clients are quite reactive to that.

11357 MR. LAMARRE: I would add that we don't think that we are competing with existing services.

11358 THE CHAIRPERSON: No. Well, that has to be assumed, I guess. From the perspective of the applicant, if they follow the Commission's direction, it's inherent that they think what they propose is not competitive with existing services. The existing services, obviously some of them have different views.

11359 MS CÔTÉ: Could I also add one thing? It is that in reviewing the position of certain intervenors on the test of direct competitiveness, I was impressed by the fact that most existing services suggest limits or a quantitative test or quotas and we do not think this is the way to go.

11360 THE CHAIRPERSON: You may, of course -- I'm sure you will follow the hearing, you may, of course, vary your list one way or the other by Phase IV, depending on the discussion that we engage into with various applicants.

11361 One of the general questions we have addressed as well is the whole question of implementation of service. I see that except for three of your applications, you say May 1st, 2001, 1 June, 2001 or six months from a decision is when you think you would be ready. Do you think that this imposition of a time frame for implementing a service should be followed by the Commission in the licensing of Category 1 services, imposing a time frame by which implementation should occur?

11362 MR. LAMARRE: I will answer with a general comment and I will ask Francine to complement the information.

11363 The general comment is this: we have a strong belief that it's very important in Category 1 that all services approved are launched at the same time, French and English. We think we are going to face, as an industry, probably one of the most important marketing challenges. We will have to work hand in hand, all the people who will have licenses and the distributors working all together.

11364 We are, you have probably noted in our proposal, the group who are proposing to put more money than any others in marketing because we think the marketing challenge ahead of us is very important. We think --

11365 THE CHAIRPERSON: Everyone is going to want to launch at the same time as you.

11366 MR. LAMARRE: Pardon me? Yes.

--- Laughter / Rires

11367 THE CHAIRPERSON: That is their approach. They want to use our budget, right?

--- Laughter / Rires

11368 THE CHAIRPERSON: To me, that is a good idea.

--- Laughter / Rires

11369 MR. LAMARRE: So I hope you will take it as our contribution to the system, Madam Chair.

11370 THE CHAIRPERSON: More bonus points.

--- Laughter / Rires

11371 MR. LAMARRE: And therefore, I think what this hearing is doing, certainly with the contribution of CPAC, is creating a momentum for digital where we are right now creating expectations from the viewers and this is good.

11372 So we think it's important that we create a momentum, we work all together and we all use not only the TVA budget, but everybody's budget in order to make a great impact.

11373 Francine, you might want to complement this?

11374 Me CÔTÉ: Merci, Daniel.

11375 What I would like to add is certainly that it's a good idea and it's the only way to go to have a date of launch which is common to all the licensees. But I think it would be also important to have a certain time frame to implement the services and allow the licensees to get together and assess if September is a good marketing date because it's a question that is quite interesting to look at when, at the same time, all the other networks are launching their new programming for the fall season. You have the Olympics. You won't have Olympics in 2001, but sometimes, there are some special events.

11376 So a time frame would be important also to allow each licensee to get ready for a common date of launch.

11377 Also, I think that you have asked the question in certain instances for Category 2 services and we do not think that a common date of launch would apply in cases of Category 2 services. Thank you.

11378 THE CHAIRPERSON: We will revisit this question with the French services. I notice, Mr. Lamarre, that you said both French and English services to be launched at the same time. So be ready for my questions later on this afternoon. That is quite --

11379 MR. LAMARRE: Thank you for the warning.

11380 THE CHAIRPERSON: It doesn't quite compute. We will need the Digipix people or the Game One people to compute how that works.

11381 Independent production, in your applications, you do speak of independent production and independent producers. For example, that Digipix could be, on page 277, where you talk about the independent production centre for initiating almost all of the programming aired by Digipix. Those are just examples because I wanted just a general discussion, 298, I think, of Men's where you talk about considerable use of programs from the Canadian and independent production sector.

11382 For you, is that an important factor?

11383 MR. LAMARRE: I would like to give you our own philosophy of the relationship with the independent producers.

11384 My general comment is that we at TVA entertain a very good relationship with the independent producers. We have, in the last three years, increased our program budget with the independent producers. The reason for that is because they have forced us with their good ideas to do more programming with them. We believe that the key for independent producers to succeed is to bring to the broadcasters good ideas, good projects. That's our general comment.

11385 At the same time, I have to balance that with the fact that we have close to 2,000 employees at TVA working in production. What we are discovering along the line -- and I would like to echo what Trina McQueen has said here -- it is that in the specialty channels -- and it's more and more true -- you see now independent producers coming up with some specialty of their own and you see now the broadcaster developing their own expertise. I think they do complement each other.

11386 What Trina said -- and we totally agree with her -- is that in the new round of specialty channels, we would have to be very careful about how we will balance that because in some genre, there are some kinds of productions which are much easier to do and more cost-efficient to do with your own internal services. There are others that are easier to do with independent producers. Independent producers have started to work recently with specialty channels, but they are now developing their own expertise in that field.

11387 So I guess we are quite at ease with the rules there are in place with independent producers. The only thing we are saying is that in the digital world, as Madam McQueen suggests, we would need a little bit more flexibility in terms of genre.

11388 THE CHAIRPERSON: When you speak of more flexibility, do you mean we shouldn't concern ourselves with that at all? Or we should have case by case more flexible rules, recognizing the riskier different environment?

11389 Would you still think the Commission should keep that as a concern, that it has regulatory mechanism to control?

11390 MR. LAMARRE: I think it's a genuine concern, and I think we should all be concerned by the independent production field, and we are at ease with it. But I think what you just mentioned case-by-case makes a lot of sense to us, because in some cases, as you have said, it will be more risky and in some other cases it would be more appropriate to do business with them.

11391 THE CHAIRPERSON: In a general fashion, would I show an understanding of your position if I said that, for example, your position would be that in Les Affaires on the French side it would mean probably you would make less use of independent producers but more should be expected if it's a documentary channel or even the Men's channel?

11392 MR. LAMARRE: Yes. That's exactly what we meant, yes.

11393 THE CHAIRPERSON: So that answers the first and the third question. We had three questions. One was: Do you think it should be still done? And third: What kind of flexibility should there be and base on what test. Probably le genre more than anything, and the capacity is already in existence of the applicant.

11394 So that still leads us to the second question, which is: Having accepted that we would still keep it as a concern, albeit apply the flexibility, what do you mean when you say "independent producer"?

11395 MR. LAMARRE: I'm not sure I understand the aim of your question.

11396 THE CHAIRPERSON: Well, if one says there will be a rule that you will test the use of independent producers, it immediately raises the need to define when you are outside of that fence --

11397 MR. LAMARRE: Okay.

11398 THE CHAIRPERSON: -- or inside of it.

11399 MR. LAMARRE: Okay.

11400 We totally agree with the rule that an independent producer is someone who owns 66 per cent of it's own company, and we are also totally at ease with the fact that someone who is a partner in specialty channels is automatically considered as an affiliate company. We agree with those two rules.

11401 THE CHAIRPERSON: What do you see the underlying principle for the Commission expressing that concern and you agreeing that we should express it?

11402 MR. LAMARRE: Again, if you look to the genre, and if le Conseil considers it on a case-by-case basis and take for granted that there should be a balance in the system between internal production and independent producers' production, I think those guidelines or those main principles should remain.

11403 Maybe Francine --

11404 THE CHAIRPERSON: I'm curious more about what do you as a company see or understand -- as lawyers like to say, at least in English -- the mischief they you are trying to cure? Because that gives me an idea of where people are coming from.

11405 What do you think is wrong with just leaving it without expressing concern?

11406 MR. LAMARRE: Since you are referring --

11407 THE CHAIRPERSON: Because once we know what the aims are, it is easier to find the mechanism.

11408 MR. LAMARRE: Since you are referring to lawyer, I will ask mine to answer this.

11409 MS CÔTÉ: I will try to answer your question, Madam Wylie, by saying first that balance is important. The ability of the broadcaster also to provide programming at a better price, using it's own resources, is something that is also very important and should be considered by the Commission.

11410 You alluded to the fact that we have a French service, LCN-Affaires, which is news, and I would like to mention that on the public record we have the interventions of the APFTQ, which is the Quebec Association of Independent Producers, as well, I think, as the CFPTA, who have said that they agree that programming in sports and news and information could be produced be the licensees themselves.

11411 We would like to add to this that in certain genre, which do not exist actually in the analog offer as well as, in certain cases, in the proposed offers, and I refer to Digipix, which is going to commission work to independent producers while at the same time Game One would be a service that is produced internally for considerations of, as I said, the ability of the broadcaster to produce the products, and also the costs. I don't think I have mentioned the costs yet, but it has to be linked with the ability to do so.

11412 In the French language services we have proposed, there is also the service for Télé Ha!Ha!, which is comedy service, and in Quebec there have been historically very few production houses in this sector, and one of the most important is a partner of TVA, le Festival juste pour rire, and the Films Rozon.

11413 So that would also limit the ability to commission work from independent producers, at least for the first term of the licence. And then we could develop the sector of independent producers able to provide programming for this genre.

11414 So in the digital universe, when you are proposing new kind of services, it is sometime more obvious than in the analog world that the applicants and broadcasters or the service providers are more able to provide programming at a good cost.

11415 THE CHAIRPERSON: Without going into --

11416 MS CÔTÉ: Am I answering your question?

11417 THE CHAIRPERSON: Well, that's the corporate mischief. It always works better of course. The bottom line would tend to keep things, in some cases, a little bit more closed.

11418 I meant more from our perspective, what is it we are trying to prevent and I supposed that is a good example and les Films Rozon. You say there aren't too many producers doing comedy. Well, there is no comedy service. Once there is a comedy service, if it is affiliated in ownership with Films Rozon, it is not likely unless is there any -- well, my question is: Is there any necessary intervention to prevent it from remaining exactly as it is, that Films Rozon continues producing comedy and no other sector of the independent world does is the mischief?

11419 MR. LAMARRE: I guess if I can try to help you understand our philosophy there, is our general philosophy is that we -- when people come to us with great ideas -- and it is our day-to-day experience, we like to work with independent producers -- the one thing Francine mentioned, and I want to re-emphasize this because again we are looking to an environment which is going to be different than the one we are in.

11420 If I would be an independent producer today, I would spend a fair amount of time thinking about new technologies, because if tomorrow morning we open Game One, I am not sure that the traditional middle-of-the-road independent producers have right now either the expertise or the values and the resources it takes to bring me tomorrow morning programming for Game One. I certainly hope that Game One will help develop that kind of expertise.

11421 So I guess all I'm saying is this: In the early days, at least for the new services we are bringing to the table, when it comes to new genre or niche genre we will need to have flexibility.

11422 But again, we understand the industry concern you are bringing to the table. Again, we are in agreement with the concern and we are open-minded about that.

11423 THE CHAIRPERSON: Yes. And when we look at the specific applications we can see whether there is any -- if the Commission should require it, what level and how measured -- what commitments you are prepared to make should the Commission find it necessary.

11424 Now, the expression of Canadian content levels is identical in all your applications and it is, I believe, 50 per cent in the first year and remains 50 per cent throughout the year. And this would be despite increasing penetration and despite increasing revenue forecasts and the fact that in year five, except for Digipix, you would reach a positive PBIT.

11425 Is it somewhat bizarre or unusual to not have a ramp up?

11426 MR. LAMARRE: Yes.

11427 THE CHAIRPERSON: It raises the question of how will you meet the 50 per cent. Will it require a lot of repeats in the first year? And why, if you feel you can reach 50 per cent in the first year, is there not an increase?

11428 MR. LAMARRE: I will give you the general comment, and I will ask Serge and André to add additional comments.

11429 My general comment is this. It's quite ambitious as an approach to go at 50 per cent the first year. There are two things people should be looking at. First of all, the percentage is one indication, but sometimes it's misleading. Someone should be looking at the budget level. If you look to all the applicants --

11430 THE CHAIRPERSON: We will.

11431 MR. LAMARRE: Thank you. If you look to all of our applications, in almost all cases we are the ones who are suggesting to spend the most money in Canadian content, and as people were saying, we put our money where our mouth is. We spend a fair amount of time doing speeches about Canadian content. It's not only a speech, it's out day-to-day experience at TVA and that is why we thought it was important to put the kind of money we are putting in Canadian content. So that is the first thing.

11432 And then in terms of percentage, if we want to be there the first year at 50 per cent, it will mean that we will have to put more resources than what others have been suggesting.

11433 So if you look to our investment, we think we have a very impressive sheet to present to you.

11434 So maybe Serge and André want to complement the information.

11435 MR. BELLEROSE: In our specific applications for the English market, I would say that based on the Game One application, for example, we are proposing internal production and we will be able for this specific reason to have a very high level of Canadian content.

11436 In the other application, we have a lot of programming elements which are based on magazines, for example, in the Men application and the INFASHION application which would allow us to be sure that we could be able to have those new magazines ready to be launched by September, for example. For Digipix, Digipix is mainly based on the use of video coming from young creators so, of course, we will need a fair amount of Canadian content, but in this specific case, we will be able to provide more information later when we will discuss about Digipix.

11437 Maybe Jacques Dorion could provide us more information about the amount of hours which are planned to be broadcast in year one -- generally speaking, I mean.

11438 THE CHAIRPERSON: It's a forewarning to that it will raise the issue of how do you achieve it in year one with sufficient original programming in each case.

11439 MR. BELLEROSE: Well, we will repeat programs, of course. It depends on --

11440 THE CHAIRPERSON: Well everybody does. It's a question of how often.

11441 MR. BELLEROSE: But we are able to respect the 50 per cent Canadian content proposal -- commitment.

11442 MR. DORION: Good morning. A general term, Madam Chair, is in all the concepts that were submitted by TVA, we looked at a balance of number of hours of programming, looked at the universe of digital, and looked at budgets also, compared budgets.

11443 The repeat factor based on the different applications will vary, but will be anywhere between 10 and 12 per show as an average, and if you think that in a digital world the average market share of a station in our proposals will be somewhere around between .1, .2 per cent of viewing hours, it's a very small number. So the smaller in principle, the smaller the number, the more repeats you can have because people have not seen it. I mean, there is no audience concentration as such.

11444 I mean, this being said, if we compare our applications with the others also in general terms, when we have less hours than our competitors, we still deliver more money in programming and we deliver sometimes twice and sometimes three times dollars per hour producing Canadian content, especially in the magazine format.

11445 Thirdly, I would say that we start at 50 and end at 50, but others start at 40 and end at 60 or 65, but if you calculate their average it's around 50.2 or 3. So we are basically saying the same thing.

11446 MR. BELLEROSE: I would add, Madam Chair, that this is a choice we have made not to ramp up. We could have ramped-up if we had started at 40 per cent, of course.

11447 THE CHAIRPERSON: I assumed that it wasn't Mme Côté's calculator that punched 50.

--- Laughter / Rires

11448 MR. BELLEROSE: Right. But again if I may insist -- and I would like André to complement this -- it is very important that we expose to you our philosophy of programming. We are very concerned that in the new digital environment, if you don't bring quality programming, you are not going to succeed day one. When people watch it day one, if they don't like it, they are not going to subscribe and that is the challenge we are taking and that is why we think it's so important that we bring to the table something that the consumer will say, "It's good. I want it. I want to subscribe".

11454 THE CHAIRPERSON: In answering this question, Mr. Lamarre, you immediately made reference to the money spent on Canadian content which raises this whole question of Canadian programming expenditures.

11455 Do you believe that in this new world of digital services the Commission should still impose minimum levels of annual Canadian content expenditures or expenditures on Canadian content?

11456 MR. LAMARRE: As you know, we have been known in the past for extending and really go far beyond what the Commission has asked us to achieve. So for us it's a fact of life that you have to invest a lot of money in Canadian content.

11457 So I think in the digital world, you know, when I read what you have printed so far and what you have said so far, I think it's a concern and I think it's part of your responsibility to bring some minimum to the table. But again, we truly believe that we are not going to succeed in the digital world if we don't spend most of our effort on Canadian content.

11458 THE CHAIRPERSON: I gather though -- you just said you think it's still important and I assume that you think it should be applied equitably because in each case when you discuss it you do have a different view where it should be imposed, but failing all else, if we don't take your view, you name the actual other anglophone specialty services that you should be compared to and whose Canadian content percentage should be adopted.

11459 So am I right to conclude from that that you believe not only it is something we should monitor, but that we should attempt to find some equity between players?

11460 MR. LAMARRE: I think that is the general agreement.

11461 THE CHAIRPERSON: It would be difficult to now come to that conclusion considering your approach.

11462 MR. LAMARRE: Yes.

11463 THE CHAIRPERSON: Now, the Commission is often saying "Think out of the box", but when licensees say do we say, "What?".

--- Laughter / Rires

11464 So this is about where we are with Canadian programming expenditures. The staff has gone back to many applicants to say, "Look, we have calculated your Canadian content expenditures according to our traditional way of doing it" which grosso modo is taking all the revenues projected in a year, finding an average and beginning with year two applying it to the previous year as a requirement for that year with some minimal flexibility as to under -- I think I am right -- expenditures or over-expenditures, I guess, like income tax, the ability to carry it forward or leave it behind.

11465 You have not come up, except in one case with exactly -- well one is very close. No, not really. Just one case -- the number that would be yielded by applying the traditional method, and you've been told what that number was.

11466 You however do come up with a percentage and I would like to know how you arrived at it, just in general. I don't want to get into the special cases. I want to know, did you do it by looking at projected expenses and revenues and do you know why it is that there is a variance of some importance. In some cases, let's take Digipix 35, the staff calculation would need 51 per cent. Do you know and can you tell me why this difference... How did you do it so that you arrived at different numbers?

11467 MR. LAMARRE: I would like to have Serge to answer the specifics and maybe Francine can complement the information.

11468 MR. BELLEROSE: Madam Chair, the main problem with the first CRTC's proposal was that because in the first years of those licenses, there was very low revenues and very high expenditures.

11469 THE CHAIRPERSON: I understand your...

11470 MR. BELLEROSE: Our point of view.

11471 THE CHAIRPERSON: ...point of view, because in each response to the...

11472 MR. BELLEROSE: So in response...

11473 THE CHAIRPERSON: But what I want to know is what did you do to arrive at 35 per cent? I understand the reasons, you know, smaller revenues, larger expenses in Year 1, etc. But I want to see just why we are so much at odds. In arriving at 35 per cent, did you just use -- you didn't use any calculation approaching what we use.

11474 MR. BELLEROSE: Are you talking about the specific application?

11475 THE CHAIRPERSON: Well, let's talk about Digipix because there is a great variance. I just want you to tell me, did you look at projected revenues in any way, did you factor in more flexibility. How did you arrive at 35 per cent or any other percentage in the others, which, in one case, is exactly like ours?

11476 MS COTE: Madame Wylie, I think it's only math. I'm looking at the answer we provided on May 15th to the Commission in answer to the question, and...

11477 THE CHAIRPERSON: Which one?

11478 MS COTE: May 15th, Digipix. We've done the math and instead of coming to 47 per cent as suggested by the Commission, we're coming to 47 per cent instead of 50.8 per cent, I think.

11479 THE CHAIRPERSON: I don't think you understand me. I'm trying to figure out how wide apart are we as between the traditional way of calculating it, or is it a question of some people don't put all their revenues in, they say, you're wrong because this should have been in.

11480 How did you arrive at it? Did you use "un cheminement" which is anywhere near ours?

11486 THE CHAIRPERSON: And then, finding a percentage. So the discrepancy would be more -- the discrepancy would come from... I may have the wrong percentage. I have quite a few applications from you. So we will look at it again in Digipix.

11487 But one thing is for sure, there is a discrepancy. I'm just trying to arrive at how you did your calculations and I understand your explanation as to why we shouldn't apply it in the digital world.

11488 In light of the fact that you think we should have some measure and that equity should be something we look at, what test do you think we should use rather than the one we're using?

11489 As you know, various proposals have been put forward, such as -- and based mostly on flexibility to avoid the problem of the large expenditures at the beginning with lower revenues. Comments have been made about only use Years 4 to 7. Others use only when we meet profitability. Others find a way of getting more flexibility by allowing underpayment in one year and overpayment in others, by taking the whole seven years instead to actually spend the amount.

11490 Do you have any... If the Commission were looking for a test that would be applicable across the board, that you would be happy with, on what basis should it be, if it's not the basis we use?

11491 MR. LAMARRE: I would like to re-emphasize a general comment and then, I will ask Francine to insert the specifics.

11492 The general comment is -- and again, we think Canadian content is important, we are committed to Canadian content and we are at ease bringing to the table some high levels of Canadian content, even from Year 1.

11493 MS COTE: To come back on the question of the need for flexibility on the digital platform, obviously, we have said, in response to the Commission's question on this matter, that we would pay for the first term of the licence to have full flexibility.

11494 That being said, I think that the test that the Commission has proposed to other applicants before us, calculating on average of Canadian program expenditures on the average of total programming would be something that we would be ready to live with.

11495 THE CHAIRPERSON: That would be the proposal whereby you'd calculate all the forecast revenues, establish the percentage, which would be the percentage that we arrive at by doing this calculation, but then, having spent that entire amount in the seven years.

11496 You have heard, of course, the comment that this becomes difficult if there is under expenditures and then, in Year 6, you suddenly have to spend enormous sums. So that would be your preferred way of the others that were mentioned, such as taking only the last year's.

11497 MS COTE: Yes, because you're asking us to, if I may say, choisir entre deux mots. What the Commission said was a competitive, open entry world, the digital platform.

11498 THE CHAIRPERSON: Well, it's not exactly open entry if we licence only a certain number. They're guaranteed access and we don't licence competitive genre.

11499 MS COTE: I agree, but the risks are much more important than the analog platform.

11500 THE CHAIRPERSON: Well, of course.

11501 MS COTE: So taking this into consideration, there should be more flexibility and maybe a different test.

11502 Coming back to what we have said in response to the Commission's question, we would prefer full flexibility. In the case of TVA, as Daniel has mentioned, the track record is really a guarantee that the amount in Canadian programming expenditures will be there and overachieve, even, a percentage that the Commission may impose.

11503 That being said, we are ready to live with that kind of formula which is more flexible than the existing formula for the analog service.

11504 Also, the test where we compare a proposed service with an existing service in the analog world is also difficult, even if we used it in certain cases such as Digipix. In the case of Digipix, it would be more favourable to the applicant than the formula proposed by the Commission.

11505 But if you compare yourself to an existing service on the analog platform, the rules of the market are not the same.

11506 THE CHAIRPERSON: No, but that is your comparison.

11507 I was going to ask you, of all these alternatives, you propose -- the one you propose is find a similar service on an analog platform and impose the same, which contradicts what you're saying.

11508 MS COTE: Yes, exactly. This is what I was going to say. The rules are... You know the Commission was suggesting to use comparable services and we did that. But thinking -- wisdom comes after the finding of the letter and thinking about this, the rules are so different. Commissioner Wilson was alluding to this, I think, with another applicant, saying that they are well nested with, you know, almost sometimes guaranteed revenues, which is not the case since 1996. But before 1996, the generation of services were well at ease with almost guaranteed services.

11509 This is not the case on the digital platform, and therefore, we might consider much more, much, much more flexibility, at least for the first term of the licence.

11510 MR. LAMARRE: I guess, just to come back to our vision, because that's important, that our vision reconcile with your rules,...

11511 THE CHAIRPERSON: Rules with our vision.

--- Laughter / Rires

11512 THE CHAIRPERSON: We are open to discussion, because in all of these cases, the last comment you've made was, Digipix is similar to Canadian Learning so that's it, and Game One is similar to Teletoon or Tree House, so that's what I will... I would tend to, even with your comments, put that at the bottom as a test.

11513 The numbers, of course, is something different.

11514 MR. LAMARRE: The only thing I would like to say -- because we don't want to sound defensive about that -- the reasons why...

11515 THE CHAIRPERSON: What's wrong with that?

--- Laughter / Rires

11516 MR. LAMARRE: The reasons why we're talking about flexibility is for the same reasons that everybody, for the last three days, have been telling you that we're looking into a crystal ball and we don't know what exactly lies in front of us.

11517 But it doesn't change our philosophy, which is to invest early in the game in Canadian programming. And when you look to the level, you know, we think that we will do what we always did in the past to exceed the Canadian content level. We just want to be prudent because we don't know exactly the number of subscribers, we don't know what's going to happen, we don't know the supply.

11518 We did our studies, obviously, but again, we are coming to you with a prudent approach. But it doesn't change our vision. Our vision remains that the level of Canadian content we're going to bring to the table is going to illustrate the kind of success we can bring. Otherwise, we are not going to be able to distinguish ourselves from others.

11519 THE CHAIRPERSON: ...as between the method that was put forward by... One example is taking all seven years and saying you have seven years to spend this sum and complete flexibility and keeping some regulatory oversight in-between, would you see a mechanism where, up to a certain level of underspending and overspending from year to year could be instituted so that we don't get suddenly your competitor coming before us after they received a licence because they promised more than -- more licences because they promised more than you and it's now your sixth and they can't reach it. What do we do then?

11520 MR. LAMARRE: I think what you're proposing makes a lot of sense.

11521 THE CHAIRPERSON: It would be to find some percentage of carry-over. I meant to confirm with the staff, but I do believe we now have a five per cent possibility of whether that could be more. That's something we can think of by phase 4.

11522 I think the consensus appears to develop that there should be some test. It should be based on the numbers put forward. This is a competitive process. But perhaps applied with a view to more flexibility for the companies and not something which makes little sense from a regulatory perspective in terms of monitoring.

11523 MR. LAMARRE: We'll be delighted to join your consensus.

11524 THE CHAIRPERSON: So maybe that would be an answer that would not lead us to a ridiculous situation in years 6 and 7 of licences, but would still provide maximum flexibility. Obviously, when we get to the specific application, you may end up being asked a question of what would you agree to complete the record.

11525 Interactivity has been discussed with all the applicants. You have mentions of interactivity in all of your English language applications. The language used, for example in Digipix, I think 285 and 284, in Digipix, you say, in a nutshell -- and I'm only using it as an example of the language:

"A channel for creative experimental digital video in both documentary..."

No, I'm sorry. The second paragraph on that page:

"Digipix will be the first television channel in Canada exploring the new frontier of digital technology."

11526 And then, on page 85, number one, you talk about a software that would allow video artists to paint free-hand on digital video and that you will provide a truly interactive creative opportunity for viewers via both web site and TV screen. There is similar language in your applications.

11527 Would it be fair to say, however, that the interactive elements that will be implemented early in all four of your applications will be additional program related enhancement and offerings over an Internet web site, as opposed to a more advanced interactivity via the TV screen?

11528 MR. LAMARRE: What I would like to say -- a couple of comments, if I may, and then I will ask our experts to complement the information.

11529 As André said earlier, we have a culture at TVA of interactivity, because our main shareholder has been a pioneer in interactivity and we've learned from that experience.

11530 Being a little bit more modest now, I have to say we've learned a lot lately because it's changing, as we all know, every day. We think right now, we have the right elements on hand to become a very unique interactive laboratory, sharing experiences with others. As an example of that, we are now the main shareholder of NETgraphe and we are going and we are right now developing some projects with them.

11531 We have learned a lot, to be candid with you, in the last few months preparing for these hearings, because we understand that in the new digital environment, it will become very, very important. The more we talk about it, the more we see how important it's going to become in the new digital world.

11532 So I would like to give you a better idea -- again, I invite you to look in our crystal ball -- of the kind of things that we might be doing in the future.

11533 I would like Stéphane Ethier to give us an idea of what we are going to be exploring and that we are exploring right now at TVA. Then I would ask Gilles Lioret to share with us the European experience, because I think it will give you a better idea of the process we went through with those experts.

11534 M. ETHIER: Merci, Daniel.

11535 Right now, the most advanced progress in technology and true interactivity is being done through the Internet and through the PC. Right now, it's very, very hard to forecast when the set-top box will be, number one, advanced enough, will be technologically advanced enough, and second, will be truly -- will allow for true connectivity between the viewers and between the viewer and his or her television set.

11536 Again, it's very hard to forecast when exactly those technological advances will be a reality.

11537 On the other hand, we, at TVA believe that we have to be ready for that moment, and that's why we are very pro-active in designing content, interactive content, where it actually can be tested and tried and tested with, in this case, Internet surfers.

11538 You mentioned the case of Digipix. Again, on the personal computer linked to the Internet, it's very doable, it's very practical also. The technology exists in order to allow for subscribers to go to their PC and then use that tool in order to create content, exchange content using computer software, video editing software, video grabbing, video processing software and then exchange and then create a community of viewers and Internet surfers using that technology to exchange, as we mentioned in the application, to get information to exchange on the creative process, to exchange creations themselves and work in common to make interesting interactive creations on their computer.

11539 Eventually, that will be possible through the TV set and through the set-top box. But at the moment, we want to test the technologies where they can be tested instead of drawing a very general, very vague indication of what will be done eventually without providing an accurate timeframe, because no one can do that.

11540 So we want to be ready for when that moment comes, but in order to do that, we have to use the technology that is available right now.

11542 Présentement, il y a beaucoup de débats dans le milieu à savoir quelles seront les normes techniques. Mais nous, je pense que la vocation qu'on a comme producteurs de contenu, ce n'est pas de s'attarder aux normes. Les normes, un jour, seront établies. C'est de comprendre l'effet que ça aura on the market we are serving. Right now, that's what we're doing. We're having a bunch of whizz people who are techie, who are really keen on developing those new services. Stéphane is one of those. And we don't want to be all by ourselves, in our own little laboratory at TVA, pretending that one day, we will find the truth.

11543 What we want to do is to exchange with others. That's why we like to work in partnership. We're interested about what the others are going to do, because it will impact on us.

11544 That's why we are also exchanging with people abroad and we found rather interesting the European experience. I would like Gilles maybe to comment a little bit about what they went through in Europe.

11559 MR. LAMARRE: I guess, Madam Chair, the bottom line for us is this: We have been challenged by Gilles and his team and Stéphane and our team, and what we realized is that if we look to content in the future in the digital world the same way we did in the past we might make a huge mistake.

11560 Now we have ahead of us a challenge as television programmers to not develop a television program and say we would add interactivity. Interactivity, as Gilles laid it out, is becoming included in the program. We, at TVA, are taking the gamble that it will impact importantly in the programming of television in the future and we don't want to be behind the game.

11561 We don't think that we have all the answers, but we are going to spend a fair amount of time researching the right answer. But we assume, in our philosophy for the future, in our vision for the future, that interactivity would have to be built in in our program development.

11562 THE CHAIRPERSON: Do you foresee that there will be this second level of interactivity that your colleague was describing within the term of this licence?

11563 MR. LAMARRE: We think so. We think that within a five to seven-year timeframe we will be there.

11564 THE CHAIRPERSON: So I will then ask you your views on how that will engage, the general views about how that should engage the regulatory system, because obviously you will be distributed by people who will -- distributors who may have some concern about the additional bandwidth or infrastructure changes that are required.

11565 So some of the questions we have asked is whether you foresee, which I would gather you will if you insist that it be an integral part of the programming, that additional information to be distributed by or transported by the distributor.

11566 MR. LAMARRE: We do.

11567 THE CHAIRPERSON: That would obviously be necessary, concerning your philosophy.

11568 You say you have a mini lab. Have you been discussing with distributors and with equipment manufacturers about how this will be accomplished to accommodate both the infrastructure of the distributor and the equipment that may be required and purchased by your viewers.

11569 MR. LAMARRE: Yes. We have had several informal discussions with most of the key partners in our industry.

11570 THE CHAIRPERSON: When you say "our industry", you include distributors.

11571 MR. LAMARRE: I include distributors, yes. Because in the digital world, as I said earlier, I think we will have to work closer with the distributors for the same reason you just mentioned.

11572 Unfortunately, for us, no one seems to have the final answer or the magic formula or the remedy for what is going to happen in the future, but one thing is for sure, the people who are going to dedicate themselves in searching for the right solutions are the ones who will come up with the right solutions.

11573 So we don't want to be positioned or perceived -- and I want to be clear about that, we are not going to be hi-tech developers in the future, we just want to spend the appropriate amount of time and resources to understand where technology is going to bring us. But as content provider we cannot ignore those new technologies and the impact it is going to have on programming, and that is why for us now, when we are talking about programming in the new digital world, interactivity is built in.

11574 THE CHAIRPERSON: Therefore, your view would be that it be required to be transported, and I guess it is still open as to how any revenues derived from it may be shared with the distributor. These are all negotiable terms but, to you, when it does occur it will be an integral part of the signal, so to speak, of the service that is offered.

11575 MR. LAMARRE: It should be. It should be an integral part. As you said, the economic model isn't there yet. So it is tough to talk about how we are going to share revenues when we don't know exactly when and where there will be revenue.

11576 But over and above the concern of sharing revenues for now, we are more concern about how we are going to integrate it to our programming.

11577 THE CHAIRPERSON: Would you share -- we have heard yesterday from our storefront, in-your-face broadcasters, CHUM, who are -- I think that's how they have described themselves -- who are seen as perhaps open to technology advancement, make the comment that to succeed with these Category 1 services you will have to have good, appealing programming, enhanced, as has been described by Web site's chatrooms, whatever the Internet makes possible, but that to the average viewer to be appealing you have to be as well a good provider of programming in the more traditional way, I suppose, for those who don't have Internet access. So you still see that as your responsibility for the first four or five years at least.

11578 MR. LAMARRE: Yes, that is for sure.

11579 The only different view is, again, we think we would have to integrate interactivity sooner than later.

11580 THE CHAIRPERSON: As soon as the equipment and the possibilities are there.

11581 MR. LAMARRE: Because, Madam Chair, as you know, because I heard you talking about your grandkids, you know --

11582 THE CHAIRPERSON: Never.

--- Laughter / Rires

11583 MR. LAMARRE: You know how important and dear it is for them, because as we are talking about new technology and trying to understand it, they are living through it. If we want to keep your grandkids as viewers in the future, we better get our act together and make sure that we have the new technologies that they understand much better than we do because it is integrated in their lifestyle already.

11584 THE CHAIRPERSON: Yes, it's a surprise to grandmothers to find that a favourite toy of a child now is a mouse.

--- Laughter / Rires

11585 THE CHAIRPERSON: And my only response as a grandmother is to catch about 18 mice a year in my house.

--- Laughter / Rires

11586 THE CHAIRPERSON: I thought I had joined the new century too. It's true, at least once a month, I catch a mouse.

11587 MR. LAMARRE: So if we want to keep you as a viewer, we have no choice.

11588 THE CHAIRPERSON: No.

--- Laughter / Rires

11589 THE CHAIRPERSON: That is my contribution to getting into the new century.

11598 THE CHAIRPERSON: So during those five years, you will make sure, of course, that you are familiar with the Personal Information Protection and Electronic Documents Act with regards to privacy?

11599 MR. LAMARRE: That is a given. Yes.

11600 THE CHAIRPERSON: My last question in the general area is whether your proposed services will be technically equipped to broadcast descriptive video.

11601 En français, vous avez un problème avec "descriptive"? Non?

11602 They will be equipped to provide it?

11603 MR. BELLEROSE: We have no commitment on that specific issue.

11604 THE CHAIRPERSON: I said will you be equipped to provide it?

11605 MR. BELLEROSE: For DVS?

11606 THE CHAIRPERSON: Yes. As this progresses, will the way in which you will provide the service to the distributor, make it possible?

11607 MR. BELLEROSE: Oh yes.

11608 THE CHAIRPERSON: That was just a technical question as to whether you are aware of this developing enhancement for certain sectors of the population.

11609 We will take a 15-minute break and then look at your applications, one by one, to the extent left. So we will be back in 15 minutes.

11610 Nous reprendrons dans 15 minutes.

--- Suspension à 1041 / Recess at 1041

--- Reprise à 1106 / Upon resuming at 1106

11611 THE CHAIRPERSON: Welcome back.

11612 We will proceed with the examination of the specific applications. To the extent possible, when I ask you specific questions that are pointed to commitments or explanations, we will take into consideration the general comments that have already been made and not necessarily reopen your general approach.

11613 The idea is to have a view, your corporate view and then deal with each application, remembering what you have said, obviously, about that area.

11614 Digipix, I must say this is probably for me the most difficult service to get a handle on as to what it is likely to look like and the extent to which it will be different from what is already available or might be available on existing channels or proposed ones.

11615 I certainly didn't gain any comfort as to what I understood it to look like when I saw that in your presentation at page 11, you referred to The Buena Vista Social Club and having seen that movie, how that can't be on any documentary channel or any film channel.

11616 To some extent, The Blair Witch Project as well because at the end of the day, it's perhaps a technically poorly made traditional movie in the sense that there is a jerkiness to the camera work.

11617 What is Digipix going to look like and to what extent is its programming, in the largest percentage of the programming hours, going to be different or new from what we already know?

11618 MR. LAMARRE: I would like to start by saying that for us, Digipix is probably one of the most innovative offer that we are going to make because the technology will definitely influence the content.

11619 What I would like -- because you know, we have been quite enthusiastic working with Elaine about developing that content, we realized that not only the technology is going to influence the content, but that the technology is going to facilitate the venue of a lot of new entrants in television.

11620 So I would like Elaine to give you a little bit more of her passionate views about Digipix and the new technology and then maybe André to bring that in the programming frame.

11621 THE CHAIRPERSON: And in light of my comments about being specific, how do you capture that in a description of service so that your genre can be declared to be not competitive with?

11622 MR. LAMARRE: So Elaine will answer half of your question and André, the other half.

11623 MS WAISGLASS: Digipix is a venue or a home for a new kind of program making that began around 1995. It came into being when new technology entered the picture, smaller video technology that was less expensive, more accessible to people who were basically unheard voices and did not have access or not as easy access to larger production opportunities.

11624 It was in Denmark that the initiative began with a group of movie makers who put out a challenge to the world of movie producers and auteur producers to move away from expensive technology and begin to explore the newer, smaller format. It was Les Venture who directed and produced some of the movies that fall into this category that you might like more than The Blair Witch which was not intended for an audience of our age, I think. It was directed definitely at a more of a teenage audience.

11625 So I could understand why The Blair Witch would not be as appealing to us as to a much younger audience.

11626 However, Les Venture produced Breaking the Waves and Celebration which is a very appealing and accessible movie in contrast to the type of thing Blair Witch is. But his group of movie makers put out their manifesto, their challenge called Dogma 95 and it was a challenge to movie makers to experiment with new ways of doing things.

11627 This manifesto included a vow of chastity which I have with me and I can make available to you, asking people to refrain from all the fancy technology and attempt to produce, to find new ways of expression. This vow of chastity is a promise that the people will not use extensive lighting.

11628 I think it's only natural lighting and only natural sound.

11629 The absolute simplicity in production is the watchword, and this challenge was taken up by movie makers in the U.S. and the Blair Witch people were among them. David Cronenberg in Canada has taken up this challenge just recently. He produced a little ten-minute movie that will be at the Toronto Film Festival actually this fall with his home video camera and so it's bare-bones production and innovative in the sense that artists be required to work as simply as they possibly can.

11630 At the same time, there is a spectrum leading from the simple to the absolutely complex, and this is also made possible by very recent technology that has been developed in the last few years, so that video artists -- directors, editors, and so on -- can access tools that they never had before and they can manipulate images, and you are seeing evidence of this now coming out in music videos and coming out in advertising, commercials.

11631 But recently people working in video have begun to explore this very complex imagery layering and transparencies and images within images and they are able to produce this only with this new technology.

11632 So the answer to the question: What would Digipix showcase that would be different from what, say for example, a movie channel might showcase would be works produced on video that can only be produced on video in an innovative way.

11633 Digipix looks to video as a means of artistic expression so that if we were in the world of art galleries, we would be the art gallery that was focusing on video as opposed to film. We would be the art gallery that showed acrylics as opposed to oil paint because as a medium of expression, Digipix opens many new doors.

11634 You could ask the question: Well, how would that be different from the digital video used by the Sports Channel? The answer is very different because the filter that we would apply to programming that would appear on Digipix would be work that actually uses the medium as an artistic expression. It's almost a cliche to quote Marshall McLuhan and say the medium is a message, but in this case it applies. It's prophetic of Digipix because within this medium, there is a potential for working that doesn't exist anywhere else in any other medium.

11635 One of the new technological breakthroughs has been to pair down the production crew so that one person could make a feature movie, if so moved. One person may be crazy to do that, but it would be technically now possible and the smaller the crew, the more likely it is to encounter a personal vision because one person can control what happens throughout the process.

11636 Most people working in these small format videos use more than one person, but it's just an example to show you that it could happen where people could work not by committee.

11637 So Digipix would be looking for evidence of personal expression and evidence of innovation to program things. There has been throughout the history of film a division between personal vision and general commercial stuff that has kind of cranked out. I don't mean to be rude about that, but there are productions that are made with the purpose of being commercial and Hollywood has a paradigm that was popularized by the writer Sid Fields who was a story editor who gave everyone the formula of what kind of script a movie should have and everyone now knows that 25 minutes into the movie that you have the first plot turning point and by 30 minutes the act one is finished and at the 60-minute point there is the second turning point and the climax comes at 90 minutes, and so on.

11638 Digipix is looking as a paradigm more to the stream of creativity that became very popular in the '60s and '70s. If you think of the French cinema, people like Truffaut whose movies -- or Fellini in Italy -- people whose work was definitely their own personal vision. In Canada we have a number of people who are noted for their own personal vision, for example Cronenberg or Atom Agoyan, but now in the last five years we are having a rise of people who have seized this new technology and are living in a digital video community that does not have distribution.

11639 I will give you an example of how this community exists and communicates with each other without having distribution. The people working under this new aesthetic, which includes the complex to the simple, communicate with each other in literally a global village and in Canada there are some Web sites where they communicate with each other. Mediapro.com is -- I am sorry, media.pro. It has actually a magazine and a Web site and it lists resources and people can find each other and material through the Web.

11640 In the U.S. atomfilm.com which streams samples of videos that are in this category, ifilm.com which not only streams, not only provides a community base, but also provides technical advice and there is technical support and actually a virtual school on that side.

11641 Another part of this community's is resfest.com, and resfest does something else. They have a travelling festival. So the community that produces this material relies for distribution on festivals at the moment. There is no existing home for them on television.

11642 Digipix looks to this community and the new aesthetic that they have created and whether we in this room like one particular movie or another doesn't really matter. Some things will appeal to some people, other things will appeal to others, but as a community there is a very wide ranging spectrum of things that appeal to adults, appeal to young people. But this taken as a whole will find a home on Digipix.

11643 To get a greater sense of what you would see, and to more specifically answer the question, I invite you to come to the Internet Cafe across from our hotel and we can look at some of the streaming.

11644 THE CHAIRPERSON: Unfortunately, Ms Waisglass, we are regulators. We deal in percentages and categories, and picky things.

11645 MR. LAMARRE: Madam Chair, if I may? As you have seen, Elaine is speaking with her heart and she is very passionate about the community of producers and this new technology, as she said, has not found its home, but now you certainly want us to translate it to program language and I would ask André to summarize how the program approach in broadcasting term will be laid out.

11646 THE CHAIRPERSON: Yes, well perhaps I can ask specific questions and that would go to identifying it, and one, for example, is the question of documentaries. The other is the question of movies.

11647 You have put Category A, analysis and interpretation, it includes documentaries. Category 2(b), do you want it included? If so, how many of these documentaries will there be? And you include drama in 7, mini-series, made-for-TV feature films. How many of those will there be? What is the proportion of this ordinary conventional production? I would see Buena Vista, to me, as not experimental. So it would be possible counted outside of that percentage. And then whether or not in your nature of service we should add what you have at the beginning of your Schedule 1, describing the service as creative "experimental" digital video.

11648 Your nature of service says, "Services dedicated to digital audio visual productions". Given the categories in that description, that covers a lot because everybody is going to be producing digital productions, right, and they will all be audiovisual.

11649 So number one, how many long-form documentaries? Number two, how many films that would easily appear anywhere else, and would you add experimental to your nature of service condition of licence?

11650 MS WAISGLASS: I would like to respond to the question of whether movies in this category would appear anywhere else, and in most cases, the movies that we are targeting would not appear anywhere else.

11651 There have been some crossover movies that have been successful and have originated in video and have been translated to film, but those movies very seldom find this kind of distribution.

11652 One of the inhibiting factors for producing a movie, or a feature length drama, or a feature length documentary in video, is that theatrical exhibitors are reluctant to exhibit them and distributors are reluctant to pick them up. It is only the rare ones that have actually been picked up and the Blair Witch Project, for example, was a very big surprise to the distributor. It was turned down by everybody. Somebody just happened to include it and they were very surprised when it was a runway success.

11653 Buena Vista Social Club was a movie that would never have been made in the usual way except that somebody decided that they would take a video camera and do some very intimate interviews. One of the wonderful features of this new technology is that you can take a very small camera into a situation that you could not take a big camera or crew into. This actually is a very big breakthrough because you can shoot in low light situations which Buena Vista did, and I agree that there wasn't an amazing visual treat there. However, the producer did take a big chance.

11654 THE CHAIRPERSON: Mr. Provencher will tell us about whether he wants Category 2(b), long-form documentary, and how much of it.

11655 I understand -- I think I do -- the difference, as a movie-goer, between Buena Vista Social Club movie -- but it's difficult to take it out of ordinary movie, documentary. Some people would argue it could be on the Biography Channel as well.

11656 So I am trying to help you to distinguish Digipix, not all of it, but how much of it will not be distinguishable and is the word "experimental", which is your own on page 286.

11657 What I am reading is a description of the proposed service as "a channel for creative experimental digital video in both documentary and dramatic format".

11658 MS WAISGLASS: What we are looking at, if I may, is to commission work from video producers who will be innovative, and the proposals that come to us in the commissions. We are looking for innovative work. So we would not want to commission something that was not innovative.

"Some programs shot on digital video that might be classified as conventional movies will be shown, but they would represent a small portion of the total overall programming". (As read)

11670 I am taking from that that there will be two components. There will be some conventional programming that could be competitive with others, but the core will be experimental.

11671 Would you accept a change to your nature of service. Where you say the service is dedicated to digital audiovisual production, would accept services dedicated to experimental digital audiovisual productions?

11676 You want to add 2(b), long-form documentaries. You will be showing movies, some of them will be conventional. Of something that could not be called experimental, is your 10 per cent suggestion both documentaries and long-form?

11678 THE CHAIRPERSON: So 80 per cent of the programming, generally speaking, would be experimental. So we could put long-form and movies, if this were 10 per cent, rather than 80 per cent of the other. It would give you some leeway in other programming.

11685 THE CHAIRPERSON: I am sure you will have a margin of those films that are clearly Hollywood blockbusters.

11686 MR. PROVENCHER: But I think when you describe the --

11687 MS WAISGLASS: I think André was speaking about the movie after American Beauty. He didn't refer to American Beauty. There was another one. The same actor who appeared in American Beauty appeared in a very experimental movie after --

11688 THE CHAIRPERSON: Oh, I apologize.

11689 MS WAISGLASS: -- called the Big Cohoona, where it was three people locked in a room and you never left --

11690 THE CHAIRPERSON: But American Beauty was --

11691 MS WAISGLASS: Mainstream.

11692 THE CHAIRPERSON: Yes, mainstream, but getting closer to --

11693 MS WAISGLASS: But the Big Cahoona was very experimental, on the same people, the same person wanted to do something experimental.

11694 THE CHAIRPERSON: Yes. I think we now understand what we are driving at. Experimental will be added to the nature of service. Ten per cent of what would clearly be conventional documentaries and films is acceptable, to try to put some parameters around the --

11695 MR. LAMARRE: I think the way you just described it, Madam Chair, is exactly what we are aiming at. I think it's described in a quantitative way. It gives the parameters that you need to have the level of comfort and for our competitors to have the level of comfort. But what Elaine has been describing is certainly a good illustration of experimentation and what we are going to do. I guess what it is going to be, it's going to be the entry door for a lot of people right now who have no room to manoeuvre in the actual broadcasting system.

11696 Why are we taking this challenge? We are taking this challenge because we believe those new entrant will help us to break new breakthroughs and will create a lot of interest from viewers to see a kind of art that you are not seeing on other channels.

11697 THE CHAIRPERSON: In your supplementary brief, at page 278, you talk about Digipix being a "specialty digital television service dedicated to experimental video programming services" -- so I didn't intelligently think of this word, you proposed it -- "24 hours a day, 7 days a week", but your program schedule that you proposed to us is only 18 hours. Do you plan to be on air through the night as well?

11698 We don't regulate, but we'd be curious to know, is it going to be...

11699 MR. BELLEROSE: No, we would be on-air 24 hours a day, but regulated on 18.

11700 THE CHAIRPERSON: How would it work? You would repeat...

11701 MR. BELLEROSE: Repeat, yes.

11702 THE CHAIRPERSON: In a wheel type fashion?

11703 MR. BELLEROSE: Right.

11704 THE CHAIRPERSON: Your Cancon levels of hours now, in the -- at 7.4, where you indicate Canadian content 50 per cent throughout, but if we take your schedule and calculate it, your sample program schedule indicates over 90 per cent of Canadian programming.

11705 MR. LAMARRE: Again, because of the nature of what we're talking about, most of the content is going to come from Canadian people bringing to us their own content. And as I said earlier, it'll be an entry door for a lot of new people, and as Hélène described, rightly so, there is already a lot of people who either have programming available for us which have never been shown anywhere or people who are developing programs. So that's why the level of Canadian content is so high for Digipix.

11706 THE CHAIRPERSON: Now, we will go back to the whole question of Canadian programming expenditures with an actual page in front of us. The aim is to understand whether you would accept the percentage of Canadian programming expenditures by reference to the revenue with some methodology that would add flexibility which would have to be -- which we have to think through during the hearing and after.

11707 So I refer you to section 8.2 of your Application, which is, if you look at the top, you have the pagination at the top right-hand corner, 296, it would be -- I think it's your pagination, just so that we are looking at the same thing.

11708 I was asking you how you had arrived at the percentage and I was using 36 which is 35, 36, but...

11709 MS COTE: Excuse me, Madame Wylie. Could you describe the document, the title of the document?

11710 THE CHAIRPERSON: It's Programming Expenses.

11711 MS COTE: Okay, thank you.

11712 THE CHAIRPERSON: And then, obviously, we'd use 8.1 to get the total revenue. We arrived at the 51 per cent by using 8.2, including acquisition and production of Canadian programming for the total, in the line "Total Canadian Telecast Expenses". We added that for the seven years, and then, we used 8.1 at page 297 and used as a denominator the total revenue. That's the usual method.

11713 I have a feeling what happened is maybe you didn't include both lines in the Canadian programming production in the programming expenses, or did you just pick 36 per cent because that was the percentage of the analog service you want it to be compared to.

11714 But is that methodology understood by you and one that would be acceptable if we had a method of providing flexibility, but that in the end, you would have spent 51 per cent of the revenues achieved on Canadian programming?

11715 MS COTE: I just want to make sure, Madame Wylie, that I understand you correctly -- we understood the question correctly. Like, in the section 8.1, Financial Operations of Digipix, you have a line under "Revenue", just before "Total Revenue" which is called "Other Distribution".

11716 THE CHAIRPERSON: No, we didn't put that in.

11717 MS COTE: You didn't put that in. Thank you.

11718 THE CHAIRPERSON: No, revenues would be the subscriber revenue and the advertising revenue added...

11719 MS COTE: This is fine.

11720 THE CHAIRPERSON: ...and then, we would take 8.2, your programming expenses, both lines for the total as the numerator, we'd get 51 per cent and then we would... So is that acceptable in all your applications?

11721 MR. BELLEROSE: Yes, it is.

11722 THE CHAIRPERSON: To use this system, and that is acceptable to you, suppose we had a variance of 10 per cent, let's say?

11723 MR. LAMARRE: The answer is yes.

11724 THE CHAIRPERSON: It would be acceptable.

11725 And what if the Commission, in its wisdom, did not give that variance? Would this calculation be unacceptable as a condition of licence? If we ended up saying, no, we're staying in the box, we'll do it as before and say 51 per cent of the previous year with only the five per cent flexibility.

11726 MR. BELLEROSE: No, it wouldn't work, because of the specificity of the new environment.

11727 THE CHAIRPERSON: Okay.

11728 MR. BELLEROSE: And the growth.

11729 THE CHAIRPERSON: Your answer would be the same everywhere.

11730 But at least we know. That's what I was trying to ask you this morning, how did you arrive... But after looking at it, I think the 36 or 35 per cent was based on Canadian learning.

11731 MS COTE: We thought that the difference, the discrepancy between the Commission's calculations and our own was related to the addition of the distribution...

11732 THE CHAIRPERSON: And we agree with you...

11733 MS COTE: Okay, thank you.

11734 THE CHAIRPERSON: ...not to put that in and you agree that it ends up to 51 per cent and we remain to arrive at flexibility and then that would be satisfied for you. That would be a sufficient move out of the box.

--- Laughter / Rires

11735 THE CHAIRPERSON: Your target audience is very different in a number of places. Sometimes, Ms Waisglass referred to younger audiences.

11736 At page 286 of your supplementary brief, you talk about, at the very bottom of the page, a target audience of 18 to 34, but at page 272, you talk about 25 to 54, and sometimes 35 to 55, and sometimes, you separate it, you say your primary audience, your secondary audience. What is your target audience?

11737 MR. BELLEROSE: Jacques Dorion will answer this question.

11738 MR. DORION: Madam Chair, the target audience for this channel, the core group will be 18 to 34, the secondary group being the 35 to 54, knowing that this kind of programming will attract -- usually attracts a younger audience, festivals and so on.

11739 Your comment about adults 25-54 probably refers to our calculation of advertising revenues where, to simplify calculations, we basically, for all of our applications, we base our calculations on adults 25-54 that would watch each station, given that this is the most common used target group for advertising purposes.

11742 THE CHAIRPERSON: ...and you estimate average audience per minute, 25 to 54.

11743 MR. DORION: Right. And for each of our applications, using adults 25-54 does not implicitly -- does not mean that the service addresses 25-54. It's just a common denominator, like you said, of calculating advertising revenues. It's much quicker and it's a macro model, if I may say.

11744 THE CHAIRPERSON: What did the CROP survey test?

11745 MR. LAMARRE: I will ask Alain Giguère to answer that.

11746 MR. GIGUERE: Yes, good morning, Madam Chair.

11747 We did a study among English-speaking Canadians from age 18 to 55 and 68 per cent of this group demonstrated an interest in this new channel. We've looked fairly large, from 18 to 54, even though the target group was 18 to 35, and then the second group, 35 to 55. But as far as the numbers of CROP are concerned, the interest for the channel is fairly flat among all these age groups. If we start at 18 and we stop at 55, approximately, we were playing around a 68 per cent interest for this channel. So I think the market has responded quite enthusiastically about the offer.

11748 I have to point out that the definition of the channel we gave in the interview was definitely talking about experimental films and programming not available on other channels. So we made that clear, what was the definition of the channel we're proposing.

11749 THE CHAIRPERSON: Independent production, at page 277 of your supplementary brief, you say that Canadian independent sector will furnish almost all of the programming air by Digipix.

11750 In accordance with your earlier characterization of what independent is, do you have some percentage of what percentage would not be dependent or affiliated, as you defined it?

11751 MR. LAMARRE: Considering the kind of production we are talking here, i.e., experimental, I'm not even sure that independent production companies that we are talking about here, because in several instances it will be one individual doing his own production.

11752 THE CHAIRPERSON: So you would be comfortable to say 99 per cent?

--- Laughter / Rires

11753 MR. LAMARRE: I think we will need some room to manoeuvre, but what I would certainly say is that most of our programming will come from individuals bringing some new source of -- and that, we think, is the appeal of Digipix to the system, is that -- to use your own term "being out of the box -- I really think we will be out of the box in terms of the system here, because someone will not have to have his own corporation and zillions of people and the big overheads in order to do television.

11754 At Digipix, if someone comes and has creative ideas, he will find a home at Digipix.

11755 THE CHAIRPERSON: But if JPL gets an exciting idea --

--- Laughter / Rires

11756 THE CHAIRPERSON: -- it will be within the 1 per cent.

11757 MR. LAMARRE: I would be tempted to say, if one individual at JPL wants to do his own production for Digipix, he will be welcome.

11758 THE CHAIRPERSON: Are you a producer, Ms Waisglass, as well?

11759 MS WAISGLASS: Yes.

11760 THE CHAIRPERSON: Yes. So would you be comfortable with 90 per cent of your programming going to the independent?

11761 MS WAISGLASS: With 90 per cent being independent?

11762 THE CHAIRPERSON: Producing --

11763 MS WAISGLASS: I would live with that if --

11764 MR. BELLEROSE: No.

11765 Madame Chair, the problem is that in this specific application -- I would like to answer, because --

11766 THE CHAIRPERSON: Oh, yes. I was just going to suggest it could be 20 per cent.

11767 MR. BELLEROSE: No. I would like just to precise something about the programming.

11768 We will commission creators for new digital videos, but in our program schedule we will have to format some programming, and in our budget and in some of our programs we have expenditures related to those needs specifically.

11769 For example, when we have programs such as International Festival Pix, this program would present videos from creators, but presented in a way that we will have to package the show. These kind of shows might be produced by independent producers, but they might also be produced by in-house production too.

11770 THE CHAIRPERSON: If the Commission, in its wisdom, thought that a limitation should be imposed, would it be easier, then, as a percentage of your expenses on Canadian programming?

11771 MR. BELLEROSE: I guess so.

11772 THE CHAIRPERSON: It would. And having agreed what that will be, what percentage, generally speaking, of those expenditures would go to independent producers as defined, a general --

11773 MR. LAMARRE: I think 60 per cent would be a good number to give us room to manoeuvre but, again, I --

11774 THE CHAIRPERSON: And to take into account the formatting.

11775 MR. LAMARRE: Yes.

11776 The 40 per cent, as Serge just described, it will be for formatting. But I want to be clear on the approach we are taking here. The approach we are taking is using material from independent producers on their own --

11779 THE CHAIRPERSON: Yes. But you may find that suddenly JPL has converted itself into a real exciting experimental boutique.

11780 MR. LAMARRE: Then, they will have 40 per cent to manoeuvre.

11781 THE CHAIRPERSON: Now, we are talking.

--- Laughter / Rires

11782 THE CHAIRPERSON: How much original programming in percentage do you see in Canadian content?

11783 MR BELLEROSE: Maybe Jacques Dorion would be able to provide this answer?

11784 MR DORION: Are we talking original hours, Madam?

11785 THE CHAIRPERSON: Yes.

11786 MR DORION: All right. Okay.

11787 We are planning just about 400 hours, 396 hours of original programming, consisting mostly of commissioned work to independent production and, to what Serge was saying, acquisitions, Canadian and foreign, to be, if I may use the word, packaged by the station to make them, you know, programming to watch. I mean, we will have to package a lot of stuff together.

11788 THE CHAIRPERSON: But these number of hours of original programming are Canadian original hours that would satisfy your Canadian content level.

11789 MR DORION: I'm not sure I understand quite well your question.

11790 We will deliver, if I may say, 396 hours in a year of original programming, of which over 50 per cent -- or 50 per cent TVA says will be Canadian.

11791 THE CHAIRPERSON: Will be Canadian.

11792 MR DORION: Right. Right.

11793 THE CHAIRPERSON: Now, unless my colleagues or counsel have questions, I will move on to Men's TV.

11794 Counsel?

11795 Commissioner --

11796 COMMISSIONER WILLIAMS: Williams.

11797 THE CHAIRPERSON: -- Williams.

--- Laughter / Rires

11798 THE CHAIRPERSON: There is only one of you, not 88, and I am confused anyway.

11799 COMMISSIONER WILLIAMS: Good morning.

11800 In your contribution to independent producers you have stated $250,000 would be allocated over the license term to a First Nations Fund for producers in these communities. Have you identified First Nation production companies or individuals to work with yet?

11801 MR BELLEROSE: I think Elaine should answer this question.

11802 COMMISSIONER WILLIAMS: Okay. I can add a bit more and then maybe you can get it all in the same answer.

11803 If so, have these producers been selected from a regional, national or Quebec area?

11804 Where are they from?

11805 And does your company work with aboriginal producers now?

11806 I guess that is three wrapped together.

11807 Thank you.

11808 MR. LAMARRE: The last answer is no, not yet.

11809 And as for who would be working with, Elaine has more experience than we do in that community so I would ask her to answer the question.

11810 MS WAISGLASS: I'm going to ask you to repeat the part of question that you are directing at me.

11811 COMMISSIONER WILLIAMS: In your contribution to independent producers you have stated that $250,000 would be identified to be spent over the license term with First Nations production companies or individuals. I'm just wondering if you have identified any that you are going to work with and where they are from.

11812 MS WAISGLASS: You are speaking about the fund, the special fund? Yes.

11813 COMMISSIONER WILLIAMS: Yes. Not where they are from specifically, but which region or are they national. It doesn't have to be by community.

11814 MS WAISGLASS: Well, in July I made a trip to the Conn River Reserve and spoke with people there, people who are involved with the school system and with the Chief of the reserve. They already have some video programs in place and they were very excited about the possibility of Digipix licensing video programming from them.

11815 The fund is a separate amount of money from licensing fees. The fund would be something that a reserve such as Conn River could apply to for a special need. For example, if their community centre or their school needed some equipment, they could apply to this fund.

11832 LA PRÉSIDENTE: Il restera évidemment à établir... nous discutons évidemment, là, avec les requérants... ce qu'on peut faire pour, comme on disait en anglais hier, to make it work and make it as equitable as possible since it is competitive.

11833 Counsel?

11834 MR. McCALLUM: Do you have a definition of what would be meant by "experimental" that you agree could be included into the nature of service?

11835 MR. LAMARRE: We could provide you with a clear definition, yes, of what we mean. We will be delighted to do that.

11836 MR. McCALLUM: We are accepting some undertakings in Phase II of this process. Would you like to produce a suggested definition at that stage?

11837 MR. LAMARRE: Yes, we would. We would like to, yes.

11838 MR. McCALLUM: Thank you.

11839 Just on the program categories and the discussion you had with Commissioner Wylie, did I understand basically you said that there would be something like a 10 per cent cap of programming on Category 2(b) which is Long-Form Documentary?

11840 MR. BELLEROSE: We were talking about 80 per cent, 10 and 10.

11841 MR. McCALLUM: That's right.

11842 MR. BELLEROSE: Yes. Those are the numbers.

11843 MR. McCALLUM: What I'm just a little unclear about is the categories because you have checked off Category 2(a) which is Analysis and Interpretation and then there is Category 2(b) which is Long-Form Documentary. Is that first 10 per cent to be split over categories 2(a) and 2(b)?

11844 MR. BELLEROSE: Yes.

11845 Mr. McCALLUM: Again, with this series of questions, if you want to come back in Phase II and clarify, I have no problem as to --

11846 MR. BELLEROSE: Yes.

11847 THE CHAIRPERSON: Perhaps I can interrupt if you don't mind and clarify. I mean I may have been misunderstood and understood you to understand me.

11848 What I was talking about is if we had experimental in the nature of service, we now have a core service which would have somehow to meet that word, not easy. Ms Waisglass finds it easy. Probably we wouldn't if somebody complained that you were not in compliance. That could include, in my view, a documentary. The 20 per cent less would be long-form documentaries and movies that are, by your own admission, possibly non-experimental or conventional. Is that what you are hearing?

11849 MR. McCALLUM: Yes.

11850 MS CÔTÉ: Because this is the way I understood it.

11851 THE CHAIRPERSON: That would tighten your genre of service, leave you some latitude, but not allow the whole service to look like a documentary, ordinary service. Counsel?

11852 MR. BELLEROSE: I understand that we would not have to split documentaries and movies in that 20 per cent. Thank you.

11853 MR. McCALLUM: So then we could design a condition of licence around those. Thank you.

11854 Just one further clarification.

11855 I believe in Schedule 1 of your supplementary brief, you indicated a wholesale fee of 50 cents. But in the Schedule 15, the assumption for revenue calculation was at 55 cents. Can you indicate which one should be the right one?

11856 MR. BELLEROSE: Fifty-five.

11857 MR. McCALLUM: Fifty-five cents. Thank you.

11858 Thank you, Madam Chair.

11859 THE CHAIRPERSON: Thank you, counsel. We will move now to the Men service. I'm sure you followed carefully the other Men service. Did somebody follow the examination of another Men-related channel? I forget -- by CTV and I forget what it was called. Men's Entertainment, yes. So we had made some distinctions as between the various types of services dedicated to men could be going beyond the box of TSN.

--- Laughter / Rires

11860 THE CHAIRPERSON: So again, we will, no doubt to Ms Waisglass's astonishment, go into the description of what is a man's channel.

--- Laughter / Rires

11861 THE CHAIRPERSON: She would probably agree with me that a service described as a service dedicated to men's lifestyle with the number of categories of programming, including drama, variety, general entertainment and human interest, miniseries, made-for-TV-movies, is very broad.

--- Laughter / Rires

11862 THE CHAIRPERSON: I'm wondering if you can tell us how this will be a distinct programming niche.

11863 MR. LAMARRE: I would like to give you some general comments and then I would ask Jacques Dorion to go into a little bit more detail.

11864 But I guess our approach has been designed through what we had analyzed in the magazine business. Even if, for various reasons, it sounds to people that the project we are proposing is broad, we have the feeling that we are quite niche in terms of our positioning.

11865 When you look to the success that the men magazines are having right now and the kind of money that people are willing to pay for them, we really think that we have something which will be of great appeal for the men viewers.

11866 On that, I will ask Jacques to give other additional information.

11867 MR. DORION: We say men deserve a lifestyle TV service. By this, we mean men, you were right, are interested by other things than sports and business news. Everywhere in the media business, in the media consumption, we see signs that men have changed their verbatim, the new man, the new values, the new aspirations of men. We would like to bring this to the screen, bring, shall I say, content that is right now accessible to Canadian men mostly in the magazine field and bring them on television in a form that is mostly documentary and magazines.

11868 Our service will be 100 per cent, we call it lifestyle, just like our INFASHION application. Lifestyle magazines have been growing in the past five years, especially in the men in the world: France, U.K., U.S. The magazines and the documentaries that would appeal to men are not available presently in the Canadian services. That is information, entertainment, light entertainment presented in a light way.

11869 You will also notice that three of the largest -- and if you include Global -- four of the largest broadcasters in Canada thought of this need and have identified a need. Our conviction is that a lifestyle station for men would have a very high appeal, knowing that the preliminary research we have from other countries where digital television is available, men consume more television on digital than their average consumption which is low, we know.

11870 Second, men services have very high appeal in the different bouquet, or different offerings in the world.

11871 THE CHAIRPERSON: So what I hear you say is you are going to show the new man on TV.

11872 Interestingly, one of the descriptions of the CTV's programming was the revival of men being men which led me to suggest this would be a horror movie.

--- Laughter / Rires

11873 THE CHAIRPERSON: And should be in the horror genre. So you don't have a competitor in the CTV application.

--- Laughter / Rires

11874 MR. LAMARRE: Thank you.

11875 THE CHAIRPERSON: You could change your mind by Phase IV, though.

11876 So you will have then -- although you have in your nature of service, Category 7 which is drama and so on, a limited amount of Category 7 which would be movies and all the drama, would you be prepared to limit it to a certain percentage?

11877 MR. LAMARRE: Yes.

11878 THE CHAIRPERSON: By condition of licence?

11879 MR. LAMARRE: Yes, we would because it's crystal clear in our mind what we want to accomplish with this. Because there is a lot of new trends for men. People have new areas of interest. As you said earlier, it's no longer only sports. They have all sorts of other activities and that is why when you look at the success of all those magazines, sometimes people are surprised with the level of interest that men have in certain areas.

11880 So not only would we accept the limitation you just said, but for us, I don't think it will interfere with what we want to accomplish as a channel.

11881 THE CHAIRPERSON: So what would be in percentage the limitation that you would impose on Category 7, the drama --

11882 MR. LAMARRE: Ten per cent would be acceptable.

11883 THE CHAIRPERSON: You just mentioned something beyond sports, but in your description of programming in Schedule 10, there are references to sports. Can you tell us whether your categories need to be expanded to include the sports category?

11884 MR. DORION: I mean sports does not appear as such in the programming grid. I mean the subjects that will appeal to a lifestyle TV station for men are the ones that are outside sports. They are fashion, wines, cigars, technology, books, films, art, mafia stories.

--- Laughter / Rires

11885 MR. DORION: Adventure sports, but specific. They would be more like kayaking or things like that, the fitness, the health. I mean sports is not part of this application. I mean it's a 100 per cent lifestyle only and again, magazine documentaries and material that was never aired in Canada for more than 90 per cent.

11886 THE CHAIRPERSON: So you would not then foresee any need to add the sports category.

11887 MR. LAMARRE: No, because it's not in the mission of our channel.

11888 THE CHAIRPERSON: Yes. So that nothing would appear there that would be the type of thing you would see on outdoor life or in a sports channel, either amateur or professional sports.

11889 MR. LAMARRE: No.

11890 THE CHAIRPERSON: Interestingly, we already know because we are such experts in this area that even the fashion file is sometimes very popular with men.

11891 MR. LAMARRE: Yes and that is why --

11892 THE CHAIRPERSON: So there is a broad range of interest.

11893 MR. LAMARRE: We have been surprised ourselves to observe, for instance, that shows at TVA like Vins et fromages, for instance, there are more men than women watching that show. Men are interested not only about wine, but more and more so about cooking and about --

--- Laughter / Rires

11894 MR. LAMARRE: Touché.

11895 THE CHAIRPERSON: I'm sure all those mice I'm catching are male ones.

--- Laughter / Rires

11896 THE CHAIRPERSON: So you understand the aim is to distinguish how much of these other categories, sports and 7, so sports you would not add it as a category and the other, you would limit it to --

11897 MR. LAMARRE: To 10.

11898 THE CHAIRPERSON: -- 10 per cent.

11899 MR. LAMARRE: Yes.

11900 THE CHAIRPERSON: Now, either by accident or by design, your Canadian content expenditures for this channel according to our calculation in the fashion we discussed earlier are, to the decimal point, the same. Would your answer be the same as before, that this method of calculation, using the same two forms, would be acceptable to you should we find some way of providing no less than 10 per cent flexibility from --

11901 MR. LAMARRE: Same answer.

11902 THE CHAIRPERSON: This is obviously at the level of discussion as a compromise from what we put forward earlier. So there is no assurance that this is what we will end up with, but the hearing is not over yet.

11903 I warn the applicants who were the first ones before us that other applicants would become more recalcitrant and insistent as the week went by and wouldn't say: "Well, if that's what we have to do, we will do it." So you insist on flexibility.

11904 Next, fashion: from men to fashion and I guess you will tell me there is no -- or maybe you won't -- that they could possibly be similar. How different will that be from what is existing now?

11905 I believe, if I recall, you have had -- although we are not going to get into the intervention stage now, but that, for example, the Women's channel, HGTV have a problem with your description of service. Without addressing their particular problems, how can we ensure that we will have something which is diverse and different for the viewer?

11906 MR. LAMARRE: I would ask Jacques to give you this explanation from a programming point of view and then Francine to give us some additional information from a regulatory point of view.

11907 MR. DORION: First, the INFASHION application we did, we followed the same, shall I say systematic path, building our schedule and looking at the evolution of magazine in Canada.

11908 We also mapped -- we did an interesting exercise of mapping the available programming in Canada on, shall I say, the more feminine services and compared it to what we were to do in INFASHION.

11909 We took the decision to program a balanced schedule, shall I say a better balanced programming schedule offering Fashion, Beauty, 60 per cent of the programming, of the total hours, Style, around 25, 26 per cent and Home Design, another 13 per cent.

11910 Now, these three themes constitute 100 per cent of our lifestyle programming. We defer from -- if you have noticed -- the HGTV argument is mostly on Art and Design and I think it addresses more the designation application that we don't find as a competitor because it only has a component of about 10 per cent in Fashion, Beauty.

11911 The WTN, we stick to our CARAT Study where we say that around nine per cent of their programming is competitive and when we look at their schedule and see Mary Tyler Moore and 20, 25 per cent of drama, comedy, another 10 per cent of movies, they have on air lifestyle shows, but they are mostly how-to. I would think they would be more competitors to HGTV than ours. Ours will be style, stylish.

11912 In the brief that Daniel read earlier on, we said we will blend. I mean the principle of the chain, the concept is to blend the best from Canada, in terms of production, what has been missing. A lot of Beauty that is missing on Canadian television that will be produced in Canada, some --

11913 THE CHAIRPERSON: Not this week.

11914 MR. DORION: We will complement that. We will blend this with material from or just like STYLE in the U.S. which is very popular. We would like to come up with a Canadian STYLE, with an INFASHION station in Canada that would blend like radio has done in the past, in the recent years shall I say, incorporating Canadian usage in their schedule every day, with people not noticing that it's Canadian. It's blended well and it's part of the concept. So it's a "Canadianized" station of a magazine concept.

11915 MR. LAMARRE: To be candid with you, we were intrigued by the success of STYLE in the U.S. They have been very successful, particularly coming in last year and being very successful bringing together a style of programming, to play with words here, that you don't find anywhere else. We would like to be the equivalent Canadian format of STYLE.

11916 We have had some preliminary discussions with them and we think that having a Canadian format of that nature will make a lot of sense, will bring a lot of Canadian content and will benefit again the independent producers' community.

11917 MR. BELLEROSE: In addition, I would say that STYLE in the U.S. is looking for content. They want to increase their programming, original programming schedule. That might be quite interesting for Canadian independent producers being able to have their own production being seen in the U.S.

11918 THE CHAIRPERSON: I notice that your description of your nature of service, as well as description in a more narrative form of the proposed service under Schedule I always have the words "Interior Home Design". Would your service -- is it your view that you would have Garden?

11919 MR. LAMARRE: I would like Francine to give a regulatory point of view on the programming of INFASHION, please.

11920 MS CÔTÉ: We have considered this argument that was made by HGTV and as Jacques said, it's a lifestyle approach. It's not a how-to approach.

11921 In the program schedule that we provided to the Commission, the home design segment occupies only about 13 per cent of INFASHION's programming -- total programming.

11922 So in light of the definition of competitiveness and the core programming and the overlap, first, it's not really an overlap because the approach is different. It's lifestyle, it's not a how-to, even if we're showing garden in a specific program, and it would not be considered as...

11923 THE CHAIRPERSON: So the word "interior", to you, would not exclude you having programs about garden design.

11924 MS COTE: No, we're looking to take the example of magazines. When you're looking at magazines such as Architectural Digest or anything like that, even if they use the words "interior design", you see a lot more things than interior design. It goes to garden as well.

11925 THE CHAIRPERSON: And could we add "excluding how-to programs"?

11926 MR. DORION: I would think so. I mean, the home design section is a section for nice images you want to see, nice -- rich and famous people, where they live, what they do. I mean, it's not... And there's a show on style called "Homes with Style". It's not about interior decorating, the restrictive definition we think of.

11927 We also plan to produce a thing called "Dream House", a Canadian component of the schedule, where we'll see, you know, not how-to and... It's stylish. I mean, it's quite different. If you look at the image that we have, if you are familiar with the magazine industry, it's taking the ideas of the In-Style Magazine. It's a very popular magazine. It sells over 100,000 copies a month. It does not tell you how to plant a tulip bulb, it shows you nice pictures.

11928 THE CHAIRPERSON: So if we had INFASHION as a service dedicated to fashion, beauty and interior home decoration from a contemporary perspective rather than a how-to perspective.

11929 MR. LAMARRE: But to your point, we would agree to saying not a how-to. If it's a concern area for you and you would like to make sure that the line is clear between the services, we would agree to your suggestion. In our mind, it's clear. We're not the Martha Stewart type of production.

11930 THE CHAIRPERSON: It's not just our concern, but when everybody comes back with the answer to their exam on Phase IV and it's not just -- it just so happens that WTN and HGTV have intervened, but others say, well, I would be prepared to accept this licence even if. Your INFASHION is -- let's say it's Global's designation or whatever or vice versa, it's helpful to you as well, if you intend to do something, that it be expressed in a way that is understandable by anyone.

11931 So to find some way of excluding how-to would be acceptable.

11932 MR. LAMARRE: Yes, it would.

11933 THE CHAIRPERSON: Now, there is the question, of course, of the drama, which is always difficult. You have 7(c) in your Category of specials, miniseries, made-for-TV feature films. And of course, one can say, well, they will only be stylish movies, but that's all I watch.

--- Laughter / Rires

11934 THE CHAIRPERSON: And I watch many different services.

11935 Therefore, would you accept a limitation on the percentage of 7(c) programming.

11936 MR. LAMARRE: Yes, we would.

11937 THE CHAIRPERSON: And what would that be?

11938 MR. LAMARRE: Fifteen per cent.

11939 THE CHAIRPERSON: So then, it's sometimes easier to have a margin than to say, is this a movie about fashion.

11940 Now, in this case, if we took the same 8.1 and 8.2, calculated your Canadian content expenditures, we would get 49 per cent. Is that acceptable, in light of what we've discussed about how to calculate it and with the caveat that there would be at least 10 per cent flexibility?

11941 MR. BELLEROSE: Yes, it would.

11942 THE CHAIRPERSON: Original programming, what would be the percentage of original Canadian programs that would be broadcast weekly, excluding repeats? We just want to see the number of hours.

11943 MR. BELLEROSE: I will ask Jacques Dorion to answer this question.

11944 MR. DORION: We are planning 515 hours for the season. I mean, the plan is to commission from the independent production 190 hours from the independent production sector.

11945 THE CHAIRPERSON: So that would...

11946 MR. DORION: And that would deliver 50 per cent Canadian content.

11947 THE CHAIRPERSON: And what about the repeat? If we were to exclude repeats from original hours, what would be the number of hours? I assume these hours would be possibly...

11948 MR. BELLEROSE: In that case, we would be under 50 per cent.

11949 THE CHAIRPERSON: Oh, this is the number of hours that you would actually commission so they would be original...

11950 MR. DORION: Yes, yes.

11951 THE CHAIRPERSON: At a minimum, that would be the number of hours.

11952 Now, Game One...

11953 Oh, sorry. Questions. Commissioner Wilson?

11954 COMMISSIONER WILSON: I was just wondering if a mistake had been made in the list of programs. The show "No Brainers", should that not be on the men's channel?

--- Laughter / Rires

11955 MR. LAMARRE: You are right.

11956 COMMISSIONER WILSON: Sorry, I couldn't resist.

11957 MR. LAMARRE: It was for people who eat cheese.

11958 THE CHAIRPERSON: Counsel?

11959 MR. McCALLUM: The 13 per cent overlap between this program and HGTV that was referred to in Madame Côté's response, if that were made into a condition of licence, you would have no problem with that, I assume?

11960 MS COTE: Could you formulate the condition of licence, so I understand it correctly?

11961 MR. McCALLUM: I'm just taking what your former answer was, where you explained that there was approximately a 13 per cent overlap between the INFASHION home and garden segment and home and garden programming in all from HGTV.

11962 MS COTE: Well, from a regulatory point of view, it appears correct to me, but I would like to hear the program consultants on this matter. It's Jacques Dorion, I think.

11963 MR. DORION: First, the duplication is not 13 per cent in home garden or in how-to. We've created a category called "home design", where we show... I mean, it'll be, at the end of the day, it might be a very, very small portion of the 13 per cent. I mean, the 13 per cent is not a how-to, it's not a home garden theme. It's a home design theme and it's an extension of the upscale, stylish home decor market.

11964 MR. LAMARRE: But to your question, yes, we would agree.

11965 MR. McCALLUM: Thank you.

11966 THE CHAIRPERSON: Going to Game One now. Again, the nature of service, am I right that I am to get from this proposal that it will not be games. It will be about games.

11967 MR. BELLEROSE: It might include some video game actions, while there will be interactive elements eventually and Internet use in the programming. It will not be game shows, but it will be video games, information about video games.

11968 Maybe Stéphane could provide more information, but we will speak about video games. But eventually, we'll maybe have video games and programs too.

11969 M. ETHIER: Merci, Serge.

11970 Actually, Game One programming will be articulated mostly around two axes. As Serge has mentioned, it will be mostly information about video games. Of course, what you will see on the screen will often be video game action, because that, of course, is visual and with an audio content that's highly TV-friendly and that is the raw matter, if you like, of our programming.

11971 But Game One programming will include analysis and interpretation of video games, will include analysis and interpretation of video games, will include some practical information about new products, about top sellers, about video game equipment, news about the video game industry, news about gamers' communities. So everything will focus around video games. It will be, as you said, Madam Wylie, all about video games.

11972 Oftentimes, you will see video games on the screen, and as Serge has mentioned, it is our vision that later in the term of the licence, when technology becomes available on the TV set or through the set-top box, it will be possible to play games on Game One. But of course, the technology is not there yet.

11973 But mostly, the format of our programming will be magazine shows, will be around what we call game clips, very similar to music videoclips, but focusing around video game action. That is the second access of our programming philosophy, number one being information and number two would be action.

11974 As I mentioned, video games are highly TV-friendly. They offer a multi-media appeal to the viewers. We see something happening in our target market, especially the younger ones, teenagers. Video games are becoming a cultural fact. Video games are replacing rock groups or movie stars in that they've become a focus of discussion. They've become also a community building experience. When young people talk about the latest video game, they talk about it with the same enthusiasm that I had when I had talked about the latest rock group a few years ago.

11975 So the action part, the action portion, I think, would be as appealing to our target market as maybe 15 years ago or 20 years ago music videos would have been to the very leading edge teenage population then.

11976 Of course, not to belabour the point that we made earlier about interactivity -- but we can't really talk about action without talking about interaction -- again, we foresee that within the context of our television programs, there will be very, very high level interaction through the Internet, for now, and eventually, through the television set or set-top box, when the technology becomes available, so that viewers are able to communicate with the program hosts, will be able to communicate with one another as well through our web site. And of course, as I mentioned, on the Internet, we would be very adamant on developing technology that would allow this community building experience.

11977 Also, what I should mention as a last point is that video games already do that. They help build communities of interest, especially with young people. There are three ways nowadays that video games do that.

11978 There are, now, the latest video games, and some of the most popular on the market are massive multi-player experiences where you can have tens of thousands if not -- actually, hundreds of thousands of players interacting at the same time on the Internet for now, and eventually, on set-top boxes. So we're talking about something that goes a lot further than just Space Invaders or Pacman. We're talking about something that really builds a sense of community between players.

11979 Also, the existence of gamers' clans. Gamers organize themselves into communities so that they can -- sort of teams, if you like -- they can organize into teams that play against other teams, again, through the Internet. Eventually, we foresee that this would also be possible through the television set and through the set-top box and we intend, Game One intends to be a part of that.

11985 THE CHAIRPERSON: In the categories that you have identified, there is game shows, dont vous parliez, the real games, actually -- some mentioned Pacman, for example. There's also general entertainment and human interest, informal education, recreation and leisure, reporting in actualities, analysis and interpretation.

11986 What would be the... Well, let me say first that in reading this, I had the distinct impression this would not be Sega. Sega has games which would be under Category 10.

11987 What would be the proportion of Category 10 programming as opposed to these other categories I was mentioning?

11988 MR. ETHIER: At the start, game shows in the sense of interactive games that can be played through the television set or through the set-top box would, of course, be limited because the technology is not there yet.

11989 Eventually, we foresee that the interactive portion of Game One programming, where, as you can see, we're already thinking about that. We're not leaving this thinking for five, 10 years down the road. We're already thinking about that. But the actual game show proportion would be very, very limited for the time being.

11990 But we're not talking about game shows in the traditional sense that you have questions and answers. We're not talking about Who Wants to Be a Millionaire here. We're talking about actual games.

11991 THE CHAIRPERSON: I was talking about Pacman.

--- Laughter / Rires

11992 THE CHAIRPERSON: But once you have this interactivity, you could turn yourselves then into a modern interactive game shows where none of these interesting categories would be there.

11993 So give me a sense of what, assuming the technology is there, of what your aim is here so we have a better feel for the service.

11994 MR. LAMARRE: Just for the sake of clarity, I would say 15 per cent.

11995 THE CHAIRPERSON: Would be game shows in the manner in which we understand it, which I agree with both your French and Canadian colleagues that we're not, -- you know, this is a moving target. But we do have a sense of what is a game show service and we want to know that that is more than a game show service, especially if we have a bouquet of 10, 12 services. It's of interest for us to know how we meet the criterion of diversity.

11996 Canadian content levels. I suppose I'll get the same answer. They're very high. They're much higher in the first year than -- I think it's almost 80 per cent, rather than 50, as to why that is, why that large margin.

11997 MR. LAMARRE: One reason... Because of the very innovative and exciting partnership we have with Game One, it will allow us to do exchange of programming with foreign countries. We think we're going to create a very dynamic production community for this channel. That's why we're having that kind of level of Canadian content.

11998 THE CHAIRPERSON: I notice that you said countries. Will all your foreign programming be acquired from Game One in France?

11999 MR. BELLEROSE: For the moment, yes. But Game One is expanding in Europe, so eventually, it could come from other countries.

12000 THE CHAIRPERSON: We have, again, the Canadian programming expenditure question. Is the answer the same? The staff calculation in the manner in which we've reviewed, was 47 per cent. That would be acceptable with the same caveat as the one discussed earlier.

12001 MR. BELLEROSE: That would be.

12002 THE CHAIRPERSON: Now, independent production. Are you planning the use of programming from the Canadian independent production sector?

12003 MR. BELLEROSE: No, we plan to produce everything in-house, based on a similar model as Game One in France. The reason is that there are economic reasons to do so and also, reasons coming from the synergies which are important from a program to the other one.

12004 Because we are in a brand new environment, we prefer to have no commitment about the independent producing. We do not exclude to have eventually independent production of programs, but what we plan to do is... Because this application is linked too with the Game One French application, we will have one production centre producing for both the French and the English channel with people working for the Game One station.

12005 THE CHAIRPERSON: Before we leave these four applications, I have one more question.

12006 I would like you to add to your exam, before Phase IV, thinking about the ease with which the Commission could devise a condition of licence with regard to Canadian content expenditures that allowed underspending and overspending up to 10 per cent from year to year, to allow some flexibility. It's not something that I don't think we've thought through. We have some experience, I guess, with the 5 per cent, but it would be good to have some advice as to how workable that would be to provide flexibility and some regulatory control, so to speak, and equity.

12007 This concludes my questions.

12008 Commissioner Williams?

12009 COMMISSIONER WILLIAMS: You talked earlier about your increase in the marketing budget and marketing efforts for these new channels or for all digital channels because you felt this was important.

12010 My impression is that marketing efforts and methods have changed somewhat since earlier national launches, like First Choice, Superchannel, TSN, MuchMusic, particularly at the last two rounds of specialty hearings.

12011 What would you be doing differently now, being that these channels will be given to the distributors and they'll be given to the consumers, they will have a large opportunity to pick and choose. They will just be handed them, basically. It's either a yes or no if they're all packaged together.

12012 Could you please provide us a thumb-nail sketch of your plans for the marketing and distribution to the distributors, I guess, because you don't have to convince them so much, but it will help to educate them so they can convince viewers to actually support this digital launch.

12013 MR. LAMARRE: I would say two things. First of all, I would say the best marketing tool is the product. I think we should all be investing more in production and that's what we're proposing in all of our efforts, because whatever you do in marketing, if they don't like your product, they're not going to buy it. So that's the key.

12014 The second one, to be more specific to your question, I think we could altogether do a better marketing job, distributors and broadcasters working together. We do have our own assets. We do own some media assets and if we combine all our forces together I think we can give altogether a better support to the new digital services, and that will be my approach.

12015 COMMISSIONER WILLIAMS: Thank you.

12016 I have no further questions.

12017 THE CHAIRPERSON: Counsel?

12018 MR. McCALLUM: No questions.

12019 THE CHAIRPERSON: Mr. Lamarre, we will give you a few minutes to answer the questions we didn't ask.

12020 MR. LAMARRE: Thank you very much, Madam Chair.

12021 The first thing I would like to say is it is a very important day for TVA today because it is the first time we come to you and ask for a licence in English Canada. For us it is a major step in a new direction. Because we now have TV International it sounds a little bit funny for us to be able to produce and show our products in the United States and in Europe and not having assets in English Canada. It is very important to us, so that is why we took this hearing very seriously.

12022 We think we come to you with what I would call very interesting projects. On one hand we bring with Men TV and INFASHION material to please cheese eaters and women -- it will remain famous -- and we bring a lot of Canadian content.

12023 You have heard me say several times "We are the champion of Canadian content and we believe in Canadian content", and again, it was only a speech that we could do only in our backyard. Now we are coming to you saying we are willing to take the gamble to make it work in English Canada. That is the opportunity we are looking for.

12024 I think the process we are going through is very helpful to us. We have learned a lot through the process by having some hi-tech people working with us in innovative ways. I think in the future distributors and broadcasters will have to work much more together in terms of marketing the programs and the projects, and we think that TVA as a major contributor of the Canadian system would like to have the opportunity to be even a greater contributor by being coast-to-coast in our two official languages.

12025 Thank you.

12026 THE CHAIRPERSON: We thank you, Mr. Lamarre and your team. I hope that Monsieur Lioret has enjoyed this truly Canadian experience.

--- Laughter / Rires

12027 M. LIORET: Je vous le confirme.

12028 THE CHAIRPERSON: We will give you until two o'clock to change panels.

12029 Nous reprendrons à 14 h 00.

12030 We will adjourn until two o'clock.

12031 Thank you.

--- Upon recessing at 1250 / Suspension à 1250

--- Upon resuming at 1403 / Reprise à 1403

12032 THE CHAIRPERSON: Good afternoon. Welcome back.

12033 Madam Secretary.

12034 MS SANTERRE: Thank you, Madam Chair.

12035 The next presentation will be by le Groupe TVA Inc. and Global Television Network Inc., on behalf of a company to be incorporated for the following services: 13th Street et 13e Rue.

12045 M. O'FARRELL: Madame la Présidente, we are extremely proud to be presenting these two applications today, 13th Street and 13e Rue with our partners, TVA, Rogers and Universal, each a leader in their respective markets which will ensure the success of 13th Street and 13e Rue as a true tier drive in the digital market.

12046 And we make that statement with confidence. In our Pollara study, 89 per cent of those interested in purchasing or renting a digital receiver said they would pay an additional one dollar per month to subscribe to 13th Street and that is because 13th Street will be distinctively Canadian and help foster new production for the independent production sector.

12047 Now for ease of reference, I would like to summarize 13th Street's commitment for you. Number one, to air a minimum of 50 per cent of Canadian content starting in year one and increasing to 60 per cent in year seven.

12048 Number two, to spend more than $31 million on Canadian programming over the licence term. And number three, to create more than 80 hours per year or 560 hours over the licence term of original Canadian programming, including, of course, new dramatic programming to be commissioned from the independent production sector.

12049 We believe it is even more important in the digital universe than in the analog universe to invest in marketing to ensure the success of these services. 13th Street has committed to invest more than $9 million in marketing and promotion to drive the penetration of digital boxes and the digital Canadian programming tier.

12050 MR. GARLAND: Universal Studios Networks has launched the 13th Street brand in France, Germany, Spain, Spanish Latin America and Brazil. Each is a leader on its platform. And as we launch new channels around the world, we create the need for more content in the mystery and suspense genre which in turn will provide opportunities to showcase Canadian mystery and suspense programs.

12051 Finally, Universal Studios offers a rich source of product in this genre, but at the same time we are dedicated to offer our subscribers the best in programming, whatever the source. In fact, if you look at each of our 13th Street channels around the world, the vast majority of its programs comes from sources other than Universal Studios. I am convinced the same will be true for 13th Street and 13e Rue in Canada.

12060 MR. O'FARRELL: We hope we have shown you that both 13th Street and 13e Rue will be both in English and French, not only appealing and distinctively Canadian and that creative programming services that you are looking to licence will be examples such as these, but that perhaps most importantly this is a proven digital tier driver and we believe it can perform the same role here.

12061 Thank you for your time. We are ready to answer your questions.

12062 THE CHAIRPERSON: Thank you, Mr.O'Farrell -- et vos collègues.

12063 I do have questions for both and to the extent possible we will try to keep them discreet, but sometimes there will be overlap.

12064 I will ask the questions on 13th Street in English and the ones on 13e Rue in French since that is the language of the applications. You are, of course, welcome to respond in whichever language that comes easier to you. But I find it a bit difficult to use the English text and ask questions in French and then go back to looking at the application in English.

12065 Is that suitable?

12066 So we will start with 13th Street. It's my favourite musical group. So 13th Street in English.

12067 First the categories of service, there is quite a discrepancy between the English and the French and I don't know whether that is important to you since you will be the same team, or whether it's just out of enthusiasm that I think at the deficiency stage, categories were added into 13th Street which raise questions of the distinctiveness of the service.

12068 So first, let me ask you, without going back and comparing the two, is it a surprise to you that there would be quite a bit of difference between the categories applied for despite the fact that the service is described in the same manner?

12069 MR. O'FARRELL: Thank you for allowing us to clarify that because I think it's one of the selling points that we would like to emphasize for you today about why you should license both 13th Street and 13e Rue.

12070 No, it is no surprise. It is, in fact, quite intentional because what we have learned through market research and basically through TVA's understanding and sensitivities to the French language market and through Global's sensitivities to the English language market, is that the 13th Street concept which, as Tony Garland will tell you, flies at 35,000 feet and then comes down on the ground, it applies itself to the market in the market-specific terms that are necessary to make it successful.

12071 This was basically the approach we used here as well, recognizing that English-viewing audiences have certain preferences with regard to that mystery genre and that French-language audiences would have preferences that would distinguish them as a matter of viewing choices.

12072 But if I may, I would like to ask Tony to say a word about that because the 13th Street concept is one that he is very familiar with and before I just hand this off to him, I want to let you know why we came to you with 13th Street in just a couple of words and that is, I think, an important thing for you to understand.

12073 We saw your call. We saw the emphasis on the need to bring services that would be digital drivers. We looked across the various platforms where there were digital services available in other jurisdictions and through the help of our friend, Ron Suter from Universal, we were able to identify this 13th Street concept as a service that was up and running, that was tried, tested and proven. It is not a singular concept as Tony will tell you.

12074 I will hand it off to him now.

12075 THE CHAIRPERSON: As long as Tony doesn't treat the next five minutes as an addition to his presentation, to your presentation.

12076 MR. O'FARRELL: I'm sorry, I don't understand.

12077 THE CHAIRPERSON: Well, I'm asking questions about categories. I'm willing to hear the difference between the two, but not another general presentation.

12078 MR. O'FARRELL: Certainly, we are just trying to be helpful. We are not always as helpful as we would like --

12079 THE CHAIRPERSON: I have been on that side of the fence before. We tell people 10 minutes and they have gone another five.

12080 MR. GARLAND: I will try to be --

12081 THE CHAIRPERSON: No matter what the question is --

12082 MR. GARLAND: I will try to be both concise and directly responsive to the question. I just add a bit of international perspective here.

12083 I think the hallmark for success for the 13th Street brand around the world is that we have defined the concept of the brand in such a way that it can easily be constructed from scratch in each of the markets where we operate that are sensitive to the local competitive and cultural situation.

12084 At its core, the 13th Street brand means danger and a destination for danger, the destination for danger. The genre that make up a typical program schedule, or the list of genre are very similar from market to market: mystery, suspense, thriller, science fiction, horror. But as each channel is developed in each market, they are sensitive to research that is done locally and what we have ended up with are very different channels in each individual market.

12085 If you go to Spain and look at Calle Trece, you see a channel that is very much oriented toward horror and somewhat bloody. If you cross the border into France, you see a channel that is very much mystery and suspense, film noir and very sensitive to images of violence on the air.

12086 Both, however, represent the concept of danger to their audiences. In Germany, you see a channel that is very much police dramas and car chases. That, to a German audience, represents the concept of danger.

12087 For us, we are very happy to see that two different competitive television markets in Canada will be catered for in appropriate ways to represent the brand.

12088 THE CHAIRPERSON: Would you be surprised, given that introduction, that the categories of programming applied for include ongoing dramatic series, ongoing comedy series, programs of comedy sketches, improvisation and stand-up comedy?

12089 MR. GARLAND: I don't necessarily see a contradiction between the overall --

12090 THE CHAIRPERSON: Horror and fun?

12091 MR. GARLAND: I'm sorry?

12092 THE CHAIRPERSON: Horror and fear and fun?

12093 MR. GARLAND: Actually, part of the definition of the brand is that we don't take ourselves too seriously. So horror and fun can often be the case. I would say Rocky Horror Picture Show may be a perfect example of that.

12094 THE CHAIRPERSON: So in your view, those categories fit into a characterization or fencing in of the genre, mystery and suspense?

12095 MR. O'FARRELL: I think technically we can answer that question to get to the heart, I think, of your issue and that is: what is the nature of the service and are there examples that we can provide you to satisfy you.

12096 There are proper parameters --

12097 THE CHAIRPERSON: Yes and it does raise the question about these categories. I understand that they are not there in French Canada. I suppose maybe they don't scare as easily, even an English Canadian scary, even through comedy.

--- Laughter / Rires

12098 MR. O'FARRELL: I would have to ask you: to what part of me are you asking that question?

--- Laughter / Rires

12099 THE CHAIRPERSON: Well, you are the programmers.

12100 MR. O'FARRELL: I would like to ask you --

12101 THE CHAIRPERSON: You know, there is also long-form documentary, news and information, informal education, recreation and leisure, on and on, even filler programming.

12102 MS BELL: We are taking that one out, right off the bat.

12103 THE CHAIRPERSON: And the comedy one. So then via the category, it enlarges the description or nature of service as suspense and mystery. I'm wondering whether these are necessary to categories to rely on or whether they simply raise then a context which would allow this service to be much broader than the focus that you want to give it.

12104 MS BELL: All right. I don't know how you would like to proceed, if you would like me to go through the categories one by one and explain a little bit. Maybe that would be helpful.

12105 THE CHAIRPERSON: Well, what you would do especially with news and comedy --

12106 MS BELL: Okay. All right.

12107 THE CHAIRPERSON: They are the ones where it enlarges the genre much closer to an open-ended movie documentary and news is --

12108 MS BELL: I think that you will appreciate --

12109 THE CHAIRPERSON: -- surprising.

12110 MS BELL: We do news headlines on prime TV even though it's not really part of its --

12111 THE CHAIRPERSON: But this is going to be a brand new service.

12112 MS BELL: Yes, you're right. I think that what we had in mind here, however, for the news category was simply to do news updates that would be very similar to the prime updates that we do that are about 60 seconds long. There is no intention of doing newscasts on this channel. So that is the extent.

12113 THE CHAIRPERSON: But it would be nevertheless general news.

12114 MS BELL: Yes.

12115 THE CHAIRPERSON: Not just news of mysteries and murders.

12116 MS BELL: That's true. In terms of the category relating to ongoing comedy series, I think that we left that in there simply because we didn't want to foreclose the opportunity in case in future, there might be a series, for instance, a Pink Panther series or Inspector Gadget, that sort of thing which would be related to the mystery/suspense genre.

12117 So for that category --

12118 THE CHAIRPERSON: I suppose if you want appointment television or destination television, there will be some reluctance to not give it a mystery/suspense. I thought this would be one of the things you would answer. It is that if you want people to identify or brand it as mystery and suspense, then this type of programming would be limited.

12119 MR. O'FARRELL: I think on the question of comedy, if I can just add something.

12120 You will see in the schedule, in the block sample schedule, Simon & Simon. Simon & Simon is a detective episodic series that has a humorous element to it because while they definitely do detective plots throughout the course of the series, they do mix in humour and that's the extent, frankly, that we had not foreseen the need for that category. It was not to go beyond that.

12121 To fortify and just underline Charlotte's point, we didn't want to be foreclosed from offering good series such as Simon & Simon because there was a humorous element to a detective story.

12122 THE CHAIRPERSON: Would you have a problem if we thought that you shouldn't have news?

12123 MR. O'FARRELL: No, Madam Chair. It's not an essential component. It's something that we found to be useful in the case of prime. But if it was felt to be an appropriate limitation, we would have no problem.

12124 THE CHAIRPERSON: If someone was making a case to us -- if you were making a case to us that a certain service is not going to be what it is proposed to be in this genre, would you feel it necessary to limit the amount of comedy, for example? Or would you leave it to the wisdom of the programmer?

12125 MR. O'FARRELL: We think that it's an element of the branding that we feel will work in the English-language market in Canada to have that availability, to be able to program Simon & Simon or that type of program series.

12126 But beyond that, as I say, we don't really have any great views of making significant use of that type of programming. So if it was your view that we could curtail that sub-category to a percentage, we could live with that, yes.

12127 THE CHAIRPERSON: Now, you indicate at page -- do you have the numbers on the right-hand top of the page? Do you have that pagination? It has been added in. But if you have it, it's the easiest way. Do you have a number on the top right-hand part? You don't.

"...fully 75 per cent of the programming will be acquired from independent Canadian producers, resulting in more than $21.1 million invested in Canadian independent production over the licence term." (As read)

12129 That raises the questions we have asked of corporations and you will, probably, as Global had when we asked them as well -- raise the question of what is an independent producer for the purpose of this commitment.

12130 MR. O'FARRELL: Madam Chair, it's a question that we have considered before the hearing and we have heard the discussion and it has been helpful to hear the views of others on point.

12131 But fundamentally, I don't think that we have changed our position from a position of saying this is a brand new world. We are standing on the threshold of a digital universe that people have made assumptions about and have made projections about in good faith.

12132 We have listened to the distribution community tell us about how the rollout is going to happen, what technology, what the interactive technology will be available over the course of time and we still feel that while we are extremely excited about the prospect of licensing in this universe, the reality is it's going to be a challenging universe, at least for the first term. And therefore, we would encourage the Commission on this topic and other topics to give consideration and due consideration to the opportunity to show maximum flexibility for the purpose of allowing these services to be successful.

12133 Hence to your question, we would suggest that the Commission not apply for starters what it has applied in the analog world as a rule of thumb with regard to independent production companies and how they are defined for the relationships that they may have with licensees.

12134 Secondly, that you consider allowing licensees -- first of all, I don't think that there is a simple formula that you could apply across separate and different genres of programming services and entertainment service would have certain realities to deal with whereas an information service would have other realities to deal with.

12135 Therefore, if you were to break them down into categories that made sense, more or less were phymatic, if you will, that it would be appropriate, for instance in this case, to allow the licensee to acquire product for the new service up to 50 per cent from companies that may be related to it according to the traditional definition.

12136 THE CHAIRPERSON: That still requires, of course, the definition of -- you know, the minute you say there will be some limitation, you have to define which companies are within and which are not. So it doesn't relieve you from having to speak to what an independent producer means.

12137 MR. O'FARRELL: I'm sorry I left that component out.

12138 I think that for the purposes, again, in the digital environment, what we would suggest you would consider as an independent production company is a company in which the licensee or partner in the licensee owns less than controlling equity in the independent producer, voting equity.

12139 THE CHAIRPERSON: Now, your commitment then is to $21 million to the independent production centre at the page I was referring to.

12140 MR. O'FARRELL: I will ask Katherine Browne to explain that to you for a moment.

12141 MS BROWNE: Just to clarify. In Schedule 1, the $21 million figure referred to actually relates to cash expenditures. The amortization figure, the amount to the independent production community that we have identified in the program schedule actually is $19.5 million over the licence term.

12142 THE CHAIRPERSON: At page 1, I think it's the second page of your Executive Summary, you identify again $21 million, I understand now, cash invested over the seven-year licence period. An additional seven million is to be spent on in-house short-form programs. So that will be produced by you.

12143 MR. O'FARRELL: Yes, that's right.

12144 THE CHAIRPERSON: By the service, or presumably, it could be produced by affiliated programmers as well.

12145 MR. O'FARRELL: That's correct.

12146 THE CHAIRPERSON: Producers rather, as well.

12147 You have also indicated that you will hand programming, international third language programming with English sub-titles. That's at your page 3, in the same paragraph we were looking at before, at the bottom of the page, the second last paragraph:

"A component of 13th Street schedule will be devoted to international third language programming, sub-titled in English that will feature the best in non-U.S. foreign affair to appeal to multicultural and English-speaking audiences." (As read)

12148 How much of that will there be? Will it also be on the French service? Where will it be purchased if it's non-U.S., considering the amount of foreign programming that will come from your relationship with Universal?

12149 MR. O'FARRELL: I will let Serge speak to the part of the question that relates to the French component.

12150 But I think that what we're looking to do is, with the cooperation of Tony Garland and the group of stations that operate under the 13th Street brand in various territories across the world, is to be able to use programming that has proven to be successful there and bring it back to the market place here for exhibition.

12158 THE CHAIRPERSON: Mr. O'Farrell, you were here earlier today and you've heard the discussion we've had with TVA with regard to the question of Canadian -- expenditures on Canadian content. Through the deficiency process, I think you have agreed to 42 per cent, using the traditional method of calculation, correct?

12159 MR. O'FARRELL: That's correct.

12160 THE CHAIRPERSON: And you did propose, as many other applicants, more flexibility because of the riskier environment.

12161 Would the approximate 10 per cent flexibility from year to year be something that would meet that concern?

12162 MR. O'FARRELL: Yes, we think so.

12163 Katherine, do you want to add anything to that?

12164 MS BROWNE: Yes, I think that would be appropriate.

12165 THE CHAIRPERSON: And in that case, then, 42 per cent would be an acceptable... I think the staff arrived at a decimal, but I think 42 per cent certainly was acceptable to you.

12166 So you did the calculation in the same manner that I was proposing this morning.

12167 MR. O'FARRELL: That's correct.

12168 THE CHAIRPERSON: I don't know if you've noticed, but if you add these numbers in 8, they come to $31 million, not 34, to produce the 42 per cent. The $34 million that you mention at the bottom of page three of your supplementary brief that we were looking at -- and I think that you referred to in your presentation as well... Oh, no. You've got it corrected to $31 million. It was 34 in your...

12169 So then, we are in agreement that that's how the numbers were arrived at and the flexibility discussed -- you may come back to us at the reply stage about that, but it appears to be something that would be workable to meet flexibility concerns.

12170 MR. O'FARRELL: Yes, Madam Chair. And as to the 31 and 34, I think that Katherine can explain it to you in greater detail. But one was spending and one was amortization. We should have qualified that and we apologize for leaving that...

12171 THE CHAIRPERSON: Oh, yes, you mentioned that earlier, how the difference...

12172 Now, interactivity. You do have revenues beginning at a certain year. That is at my page 136, your Schedule 8.4 and Schedule 12, where you have e-commerce revenue based, beginning in Year 2, in a small amount, and growing beyond.

12173 Would you explain to us what kind of interactivity this service would engage in? Would it be enhancement via the Internet or what we've been discussing earlier this week, real interactivity via decoder and through the TV screen? What level of interactivity do you see in the first years?

12174 MR. O'FARRELL: Madam Chair, we followed the discussion that you've had with other applicants very closely and we found it to be very interesting and instructional.

12175 THE CHAIRPERSON: I would have thought you would have said "very clever"!

--- Laughter / Rires

12176 MR. O'FARRELL: Well, I was referring to the whole discussion, not your part of it.

--- Laughter / Rires

12177 MR. O'FARRELL: But what we also learned in the context of this proceeding is that there are other players out in the Canadian market place that are developing interactive technology applications.

12178 For instance, you're going to be hearing an application later on in this process -- I think it's the last applicant, HIT TV. Frankly, we didn't know about e-TV until we saw that application and we didn't know what they could do in the way of interactive television as a matter of enhancing embellishing the current way services are delivered.

12179 I would like to ask Greg Treffry to give you some examples of how we envisage the interactivity, on which platforms, the web or whatever.

12180 And as to the revenue picture, Katherine Browne can tell you how we derive those revenue assumptions, how we derive those projections based on which assumptions.

12181 So Gregg, if you would start, please.

12182 MR. TREFFRY: Thanks.

12183 Our vision for the service is that if a viewer is watching a program and there are other areas of interest around or behind the subject-matter, the viewer should be able to click through this program and go into these areas. Viewers will have the means to drill deeper in the TV content. The services will push the interactive content to the edge that technology will permit.

12184 The best way that I can describe this to you is to give you some examples. For example, the Mystery Lovers Book Club. This program will allow aspiring writers to be able to attend on-line round tables, either live or through e-mail or netcams or chat. They will be able to do this through their set-top box or they can participate through their PC.

12185 Another example that we've been working on is Dial M for Mystery. This is a half-hour program that will feature a mystery plot that will be presented to viewers without a solution. The viewers will be asked to determine the solution to the puzzle through the set-top box.

12186 Some of the creative things that we've been on with our programmers and our providers are certain icons of virtual props which will be able to be accessed and allow viewers to get more information, call up clues that have been collected for re-examination, remind themselves about possible critical information about a character's job or the weather at the time of a crime. It will be through this technology that they will be able to gather enough information and determine who may have committed the crime and submit the response back to us through the set-top box, and in the following week, they would be able to see if they were correct in identifying the character.

12187 THE CHAIRPERSON: We have heard other comments about the timeframe in which we will be able to use this level to a more advanced technology that would allow the viewer to use the set-top box independently of a computer to actually have interactive fare through the TV itself.

12188 Do you agree with the timeframes that have been given, which I think lead us to believe it won't be in the first two or three years of the licence?

12189 MR. TREFFRY: What I've just described to you will be available when the service is launched in September 2001. The technology exists. The software exists in the box.

12190 THE CHAIRPERSON: Without the use of the PC. So you don't agree...

12191 MR. TREFFRY: No, the first example I gave, you could either participate in the on-line chat through your PC or through the set-top box through your wireless keyboard.

12192 The second example that I gave you, all of that will be available September 2001.

12193 THE CHAIRPERSON: And the true interactivity...

12194 MR. TREFFRY: Correct, that's how we define true interactivity, allowing the viewer to get more information about the program that they're watching and the content that is behind the programming.

12195 MR. O'FARRELL: Maybe just to add. What we've learned through this process is that there are service providers who would be able, for instance, to take a program like Dial M for Mystery, where essentially, the program is a mystery plot without a solution. Throughout the course of the program, you could, with your remote control, click onto icons that are on the screen that have been embedded into the programming when it was produced through the technology that currently exists that we believe would work with the boxes upon launch in 2001.

12196 We don't suggest that that is the end-game of where interactivity is going. But the applications that we have identified, for instance, that relate to 13th Street, those would be, in our view, ready for implementation effective upon the launch in 2001.

12197 THE CHAIRPERSON: And that would be part and parcel of the program. So we would not be at that stage of using more band width or requiring more demand on the infrastructure of the distributor.

12198 But do you see that other level occurring within the timeframe of the licence term, and being of any interest in a mystery suspense service?

12199 MR. O'FARRELL: There certainly would be great interest on our part for greater levels of interactive applications.

12200 You will agree, though, that we have to be a little bit conservative here as to when these applications are actually going to be available. Digital cable has been a long time coming. Digital distribution, we've talked about that for a while. And I think that we have to understand that this process evolves on the basis of its own dynamics and we can't really make predictions with the greatest certainty.

12201 But to the core of your question, I think what we want you -- the impression we want to leave you with is that we are looking forward to push the envelope of interactive technology to its limit at every step of the way to make these programming services on the digital tier as exciting, as entertaining and as engaging for the viewer.

12202 THE CHAIRPERSON: ...on this opportunity, then, to address the questions that we've raised with other parties as to whether you would see the regulator, as soon as this develops, requiring the distributor to deploy whatever band width is necessary to carry all the information you are sending to the viewer.

12203 MR. O'FARRELL: We think that should be the subject of a process that would identify some key questions. I think, frankly, that's a process onto itself.

12204 THE CHAIRPERSON: That you will require a further look at that, once it arrives.

12205 MR. O'FARRELL: Absolutely. Absolutely. I don't think it would be fair to any of the stakeholders to be taking a position today without having mapped out the issues a little more precisely.

12206 THE CHAIRPERSON: And your comment would be the same about compliance with the privacy requirements of the legislation that's coming into force, when that is effective.

12207 MR. O'FARRELL: On that level, of course, we would give you the undertaking that we would fully comply, upon whatever legislation comes into effect. We don't suggest that we need to think about that.

--- Laughter / Rires

12208 THE CHAIRPERSON: Yes. We are bound to ask everyone to make sure that they are aware as these things will develop possibly in an evolutionary way. The comment you were making about a process would be the regulatory aspects of this, how is it managed.

12209 The question of implementation, we have asked, as corporate questions, people's view, the applicants' views about the need to have a timeframe within which the service should be implemented.

12210 What is your view with regard to 13th Street?

12211 MR. O'FARRELL: We would agree with what Ms Côté said this morning with regard to implementation. For one, I think that we would see that all services be launched simultaneously, that the date of their launch be the subject of a consensus between the distribution community and the licensees who will have to work in concert to make this a resounding Canadian success story of launching the Canadian digital tier. Therefore, there has to be some discussion on that.

12212 I think, to that point, I think it speaks to the issue that we are all stakeholders in the success ultimately of the digital tier and we would like to use that opportunity to identify the consumer not as the consumer of the distribution world or of the programming world, but the consumer of the Canadian broadcasting system, and work collectively and cooperatively with that view in mind to serving those consumers in the most appropriate fashion.

12213 THE CHAIRPERSON: Now, without getting into the question in detail until we do 13ème Rue, there is, with regard to 13ème rue, not only a connection that renders it severable or not possible if 13th Street is not licensed, but with regard to implementation, it also is conditional upon, the way I understand it, subject to it being clarified in a few minutes, based upon reaching a certain number of digital subscribers. Would that affect 13th Street at all, either of these? Should 13th Street be licensed and not 13ème Rue, does it affect your proposal for 13th Street?

12214 MR. O'FARRELL: No, it does not affect the proposal.

12215 THE CHAIRPERSON: It's only the reverse.

12216 And should 13th Street and 13ème Rue be licensed, you would launch 13th Street along with the other anglophone services according to 13ème Rue's conditional requirement that it's either September 1, 2001 or reaching a certain number of subscribers. That doesn't affect 13th Street?

12217 MR. O'FARRELL: That would not affect 13th Street, and I think that what we can give you our assurance on is that we would be looking to have adopted, for 13th Street and for 13ème Rue, in each of their respective universes, the smartest marketing plan to make it a success with the other services that would be licensed in that language.

12218 THE CHAIRPERSON: Now, you are also aware that you have a take-home exam to bring back to us at Phase IV, are you?

12219 MR. O'FARRELL: Yes, we are.

12220 THE CHAIRPERSON: Which is, of course, in your case, probably of some importance, considering we have already heard a similar -- I'm sure you won't agree with me, but at least, in the same area, except for men's programming, of course, in the horror category.

--- Laughter / Rires

12221 MR. O'FARRELL: We will do our homework diligently and it will be ready on time, and perhaps before time, because we'd like some bonus points too.

--- Laughter / Rires

12222 THE CHAIRPERSON: I like this. This is like my old days teaching.

--- Laughter / Rires

12223 THE CHAIRPERSON: Better watch my seat so I don't get some gum on it!

--- Laughter / Rires

12224 THE CHAIRPERSON: We are now going to proceed with the French part. If there are additional questions, we will have them after.

12225 You are ready to proceed as well? You have your team for the French part as well.

12310 MR. McCALLUM: Just in the 13th Street, at one point, Mr. O'Farrell said that you would be happy with, I guess, a limit of some percentage on comedy programming. You didn't specify or suggest a limit and I just wondered if you had any idea.

12311 MR. O'FARRELL: Quite frankly, we haven't quantified that. If it were possible to ask the Commission's indulgence, that we would add that to our list of homework to do and to provide you a response perhaps in Phase II. We would be happy to do that because we have not quantified it as to how much would be an appropriate restriction.

12312 MR. McCALLUM: That would be helpful, especially if you can break it down or allocate it between 7(b) and 7(f).

12313 Again, just on 13th Street, I just wanted your opinion as to whether the marketplace would be large enough to allow for the licensing of both a mystery/suspense channel and some sort of horror channel as a result of this process.

12373 Madam Chair, I think that we wanted to impress upon you today that we thought we had come up with a programming service, both for the English market and the French market that would assist you in making your very difficult decision as you go through the 88 or so Category 1 applications in the 30 or so categories, and why we thought it was important for us to underline the success of 13th Street internationally is because it is tried, tested and proven, and we know that Canadians have a very significant appetite for this kind of programming.

12374 In fact, the Pollara research that we conducted -- and I think that Alain Giguère from CROP can corroborate from the French market perspective --demonstrated that of all the service genres that were discussed, mystery seemed to come out on top in both cases.

12375 You have a very difficult choice and we are not going to belabour the point here. We thank you for the time you have taken to discuss this with us. We think it's a digital driver, we think it's a real success story in the waiting. We think that a Canadian digital tier would be compromised in its capacity to succeed without it because we think it will be that attractive.

12376 But again, we leave it to your wisdom to make your determinations, but we would offer you one word of advice, and that is to paraphrase Fleetwood Mac, as you sit on this threshold from analog to digital, "Don't stop thinking about tomorrow. It will be better than before and yesterday is gone".

--- Laughter / Rires

12377 THE CHAIRPERSON: You are not going to speak Latin to us though.

12378 Thank you very much. So I hope you feel that you have had a good opportunity to do a "survol" of these two applications with us and we will give you a break -- not that we need one -- for 15 minutes after which we will proceed with the examination of the French-language TVA applications.

12379 It is my understanding that we will hear the Astral applications as proposed before the end of the day and we will remain, Mr. Bureau, bright and alert.